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Speaker 1: Hello, and welcome to another episode of the Odd Lots Podcast.

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Speaker 1: I'm Joe Wisenthal and I'm Tracy Halloway. Tracy, you know

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Speaker 1: what I was thinking, Like, there's so much attention to

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Speaker 1: Elon Musk and all of his controversies and the things

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Speaker 1: that he does in his personal life and Twitter and

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Speaker 1: potentially buying Twitter and the tweets and everything. I think

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Speaker 1: sometimes people forget like what an extraordinary success or what

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Speaker 1: an extraordinary company, just like Tesla has been over the

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Speaker 1: last decade. Oh boy, where to start? Well, first of all, um,

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Speaker 1: a cynic might say that Elon Musk courts that kind

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Speaker 1: of controversy quite actively and that maybe if he wanted

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Speaker 1: the focus to be on what Tesla was doing, um,

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Speaker 1: he could go about it a different way. But anyway, Yeah, Tesla, Tesla,

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Speaker 1: I mean, just looking at the share price, it's down

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Speaker 1: obviously from its peak, but over its history it's you know,

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Speaker 1: a very successful company from a purely financial basis or

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Speaker 1: just looking at the share price. Yeah, And you know,

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Speaker 1: like when I think about the last decade, obviously it

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Speaker 1: was about the rise of software. Software is eating the world, Uh, cryptocurrency,

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Speaker 1: all these sort of things that just like existing code.

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Speaker 1: And here's a company that became the biggest car company

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Speaker 1: in the world at least by market cap, by actually

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Speaker 1: manufacturing something that is actually built. And so this was

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Speaker 1: a decade in which people weren't really into manufacturing and

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Speaker 1: really weren't into capital intensive businesses. And yet during that decade,

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Speaker 1: this one company is sort of like just extraordinarily well

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Speaker 1: at a time when that wasn't really that cool. Right, Okay,

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Speaker 1: so this is possibly one of the few things that

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Speaker 1: you cannot fault elon must for it. But he certainly

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Speaker 1: likes to make things right. And you can debate whether

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Speaker 1: or not those things are realistic, but everything from electric

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Speaker 1: cars to flame throwers to you know, tunnels underground satellite

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Speaker 1: launching equipment that starlink. Yeah. Um, he makes things at

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Speaker 1: a time when the emphasis wasn't really on making things.

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Speaker 1: It was on software, as you mentioned, and sort of

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Speaker 1: the ephemeral stuff, big ideas and changing the world through

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Speaker 1: technology but not necessarily tangible technology. Right, And of course

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Speaker 1: one of our themes, and it's something that we hit

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Speaker 1: on with a lot of our Commodities episodes and you know,

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Speaker 1: some of our conversations with Jeff Curry and all kinds

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Speaker 1: of things that we've been doing over the last year

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Speaker 1: has been about this sort of the revenge of the real,

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Speaker 1: the tangible economy actually putting stuff together. It's really hard,

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Speaker 1: but it's sort of it feels like this sort of

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Speaker 1: like physical engineering is going to be one of the

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Speaker 1: huge themes of this next decade. Yeah, I think that's right.

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Speaker 1: And again I think maybe we're so used to thinking

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Speaker 1: about technology as like a search engine or a software company,

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Speaker 1: but it feels like that might be starting to change.

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Speaker 1: And nowadays when people think about technology, when they think

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Speaker 1: about technological prowess, it feels like a lot of people

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Speaker 1: think about things like semiconductors and chips and the actual

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Speaker 1: physical components that drive that kind of technological innovation. Yeah.

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Speaker 1: And so when you think about like manufacturing tech, right, like, okay,

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Speaker 1: we're talking about who's may have acturing, you might think

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Speaker 1: of Taiwan Semiconductor, which of course we've done episodes Intel,

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Speaker 1: And then another name that has to come up in

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Speaker 1: all of that has to be fox Con, which everybody

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Speaker 1: knows is basically the company that makes the iPhones, the

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Speaker 1: company that is sim Yeah, that's right. So I think again,

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Speaker 1: this is sort of one of the big themes that

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Speaker 1: has come out of the past couple of years in

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Speaker 1: the global pandemic, but also even the trade war before that.

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Speaker 1: But we all are intensely aware now of how these

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Speaker 1: tech supply chains actually work and where things are made

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Speaker 1: and who is putting them together. Yeah, and so did

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Speaker 1: you know, Well, I didn't know that until recently. Did

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Speaker 1: you know that fox Con itself wants to get into, uh,

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Speaker 1: the electric vehicle game? I didn't know that either. I

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Speaker 1: know that the head of fox Con, Terry Coo, I

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Speaker 1: know he's he's a he's an ambitious guy, he has plans,

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Speaker 1: But I didn't know about this specific space. So yeah,

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Speaker 1: I'm interested in learning more about it. Yeah, and I

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Speaker 1: think you're sort of like, it's hard to understand the

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Speaker 1: world over the last several decades without understanding the trajectory

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Speaker 1: of fox Con and so the fact that they want

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Speaker 1: to be a player and ev is really interesting. So

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Speaker 1: I think we should talk about it. Let's do it,

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Speaker 1: all right. I'm very excited because in studio with us,

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Speaker 1: this is a real treat. In studio with us, we

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Speaker 1: have a colpen. He has a Bloomberg opinion columnist normally

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Speaker 1: based in Taipei. But he is here in studio with us,

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Speaker 1: and he is going to talk He knows all about

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Speaker 1: Fox count. We'd actually I think we had him on

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Speaker 1: last year to talk about Taiwan semi, so he knows

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Speaker 1: about the world of manufacturing, the real economy that most

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Speaker 1: people forgot over the last decade. Knows a lot about it.

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Speaker 1: Plus he brought us pineapple cakes, so you know, he

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Speaker 1: automatically gets an episode thanks to thanks for the pineapple cakes.

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Speaker 1: To no worries, I apparently listeners. If you do want

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Speaker 1: to get onto the Odds podcasts, you just have described

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Speaker 1: Tracy and Joe with with goodies, and Tracy really likes sweets. Okay,

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Speaker 1: I don't know Tracy's opinion on Elon Musk, but I

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Speaker 1: know that Tracy likes sweet So yes, if you want

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Speaker 1: to get on odd Loads, send Tracy a pineapple cake

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Speaker 1: or some other pastry and you will probably get invited.

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Speaker 1: It's really that easy. Uh, Tim, Great to have you,

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Speaker 1: Great to have you here. What is Fox con Oh,

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Speaker 1: I didn't expect you to give me such an opening

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Speaker 1: and the question. All right, So so our producer Carmen

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Speaker 1: is going to have to cut this after about three

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Speaker 1: hours when you give me that question, what's interesting, I'm

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Speaker 1: going to go back in time in history, if you'll

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Speaker 1: indulge me. I think everyone first started to learn about

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Speaker 1: fox Con. That was when the the unfortunate suicides happened

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Speaker 1: and the company became famous because of it. And there's

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Speaker 1: about a dozen suicides that year. Uh and even fox

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Speaker 1: Con chairman and founder Terry Ware at first there was

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Speaker 1: a couple of suicides, and he admitted to to us

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Speaker 1: when we interviewed him at that time, I didn't think

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Speaker 1: it was a big deal. And to put it in

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Speaker 1: in in context, at the time, they had about a

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Speaker 1: million employees. So if you go to any town in

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Speaker 1: America and China and anywhere in the world, you know,

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Speaker 1: with the million employees, it's unfortunately you're going to have,

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Speaker 1: you know, a couple of suicides. It's just an unfortunate reality.

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Speaker 1: So he didn't think it was a big deal. But

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Speaker 1: after about the fifth he's like, oh, we've really got

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Speaker 1: an issue here. And of course it got a lot

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Speaker 1: of global attention from from everybody, including US Bloomberg and

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Speaker 1: Bloomberg Business Week. But that's really what put fox Con

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Speaker 1: on the radar. But they've been going since the mid seventies,

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Speaker 1: Terry Gore, who was born in Taiwan, was one of

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Speaker 1: the first people to embrace shen Jin in China across

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Speaker 1: the other side of the Taiwan straight He went there

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Speaker 1: at the time when China had decided that shen Jen

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Speaker 1: would be this special economic zone and China was just

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Speaker 1: starting to open up to the world, and Terry Guare

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Speaker 1: was very quick to embrace it. He saw a real potential. Obviously,

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Speaker 1: cheap labor was was a real draw card, but he

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Speaker 1: saw a potential for a very large labor pool and

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Speaker 1: also the fact that there could be a supply chain

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Speaker 1: building there. So he was one of the first people

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Speaker 1: to say, you know what this this is the place

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Speaker 1: to be. And so he went and set up shop there.

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Speaker 1: And one of the kind of the craziest ways or

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Speaker 1: simplest ways that he could get higher he could hire

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Speaker 1: employees because there was a lot of competition for for

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Speaker 1: labor at the time, was that he decided to just

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Speaker 1: treat them a little bit better than other employers in China. Now,

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Speaker 1: people look at the Fox con scan and say, you know,

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Speaker 1: they're a sweatshop and they're terrible on staff, and you know,

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Speaker 1: treat labor badly. Actually in context, um, and I sound

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Speaker 1: like a bit of a Fox con apologist here, but

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Speaker 1: in context, they did actually treat their employees in the

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Speaker 1: early days and right through their history actually a lot

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Speaker 1: better than than a lot of employees employers do in China.

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Speaker 1: And so one of the first things Terry Gore did

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Speaker 1: was he said, Okay, I want all of my my

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Speaker 1: workers to eat well, So every single one of them

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Speaker 1: would get an egg a day so they could get

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Speaker 1: a bit of protein. That was kind of a bit

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Speaker 1: of a way out idea at the time. This was

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Speaker 1: just to be clear, this was in the eies, seventies,

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Speaker 1: and and so Terry War is not an electronics guy.

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Speaker 1: Most people in the tech industry have a tech background.

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Speaker 1: They have an electronics background, um, maybe electronic engineering. Terry

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Speaker 1: War studied a maritime college in northern Taiwan, so he

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Speaker 1: really started shipping and logistics, and then he moved into plastics.

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Speaker 1: So he's he's kind of opening business was plastic injection molding.

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Speaker 1: And if you think of Taiwan in the seventies and eighties,

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Speaker 1: it was known as you know, made in Taiwan, cheap

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Speaker 1: plastic toys, Barbie dolls, and everything else was made in Taiwan,

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Speaker 1: so that was his business. He was a plastics guy.

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Speaker 1: One of his first things was to make the little

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Speaker 1: plastic tuner knobs on our c A t v s.

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Speaker 1: And over time he went more and more into plastics

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Speaker 1: and uh and when the electronics boom happened from you know,

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Speaker 1: the eighties, he he started getting into the business and

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Speaker 1: making the connectors that would connect to say, your printer

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Speaker 1: to your PC, or your atari to the television. And

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Speaker 1: if you remember, you know, those of us of age

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Speaker 1: can remember, they are flat cables with two thirty six pins.

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Speaker 1: They were kind of difficult to make, and so if

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Speaker 1: you could work out ways to make these connectors, you

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Speaker 1: could get pretty fat margins. And so the name fox Con.

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Speaker 1: The con in fox Con is connector. That's that's where

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Speaker 1: the name comes from. And as an interesting aside, his

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Speaker 1: brother runs a company called fox Link, which does the

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Speaker 1: cable part, the boring cable that goes between the two connectors. Now,

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Speaker 1: of course that's not as exciting anymore because pretty much

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Speaker 1: everybody's on USB and FireWire and everything else. But back

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Speaker 1: then there was like sixty different types of connectors, and

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Speaker 1: and since then they have basically been a component company,

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Speaker 1: and so we think of them as being a company

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Speaker 1: that hires a million workers, you know, at peak time

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Speaker 1: to to assemble iPhones. But if you look at the

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Speaker 1: numbers um you know, back in the mid nineties when

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Speaker 1: the PC boom was happening and people like Michael Dell

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Speaker 1: and others decided that they want to be into the

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Speaker 1: in the PC business, fox Con got into the business

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Speaker 1: of just creating the components. They weren't really assembling that much.

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Speaker 1: They were doing the components that went inside. And if

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Speaker 1: you ever opened up a desktop PC, you'll see the

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Speaker 1: motherboard inside and there's just all sorts of componentry welded

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Speaker 1: to the motherboard. That's the business that fox Con was in,

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Speaker 1: and that's to this day kind of the business they're

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Speaker 1: in right now. We just don't really think of it

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Speaker 1: because it's not a sexy But I'll tell you one thing, guys,

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Speaker 1: the margins are really, really, really good. So their gross

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Speaker 1: margins were over thirty and if if anyone really kind

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Speaker 1: of dives into, you know, the margins business, I knew

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Speaker 1: you've had. Stacy has gone on co cover Semis is

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Speaker 1: a really nice gross margin and at the time Apple

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Speaker 1: which was kind of at its worst period. INTI was

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Speaker 1: doing ten percent gross margins, so they did very very well.

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Speaker 1: Now in context, margins at fox Con dropped off over

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Speaker 1: the next decade as they went more and more into assembly,

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Speaker 1: which is not a margin business. I was going to ask,

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Speaker 1: can you talk a little bit more about the difference

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Speaker 1: between making components versus assembly and why what fox Con

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Speaker 1: is doing, you know, was was somewhat unusual at the time,

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Speaker 1: is my understanding? Yeah, no, that's I think that's a

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Speaker 1: good question. So components, um, I mean, the most high

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Speaker 1: level components are chips, right um time and semiconductor we

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Speaker 1: talked about before, and that's that's the sexy part of

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Speaker 1: the industry. But going down the supply chain, you get

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Speaker 1: these chips and you put them onto a module, you

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Speaker 1: well them together. There's other there's so many chips inside

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Speaker 1: a computer or inside an iPhone that are kind of boring,

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Speaker 1: you know, capacitors and and things that control the voltage

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Speaker 1: withinside a computing system. Now, the thing about these is

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Speaker 1: they self they sell for a dollar or two. They

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Speaker 1: don't sell for a lot of money, but they're huge,

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Speaker 1: huge volume, and because they're very very very specialized, um,

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Speaker 1: it's not easy to swap out one component from another.

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Speaker 1: So if you're a company like fox Con as they

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Speaker 1: were in the nineties, and you work out exactly how

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Speaker 1: to do exactly the right component with all the right

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Speaker 1: specs and your client, it's all the PC makers electronics

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Speaker 1: makers go, that's just the component I need. It's only

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Speaker 1: a dollar, but I need it, and it's got to work.

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Speaker 1: It can't you can't mess up. They will put in

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Speaker 1: orders for millions of them. They buy them by the bucket.

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Speaker 1: And if you're someone like Foxcon who can do that

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Speaker 1: really well and set up a production system that makes

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Speaker 1: them really well, you've got fat margins. So it's it's

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Speaker 1: very high volume but low price. Like the price point

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Speaker 1: is very low, but with fat margins, you can be

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Speaker 1: a very very profitable company and you've almost got the

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Speaker 1: market to yourself in some of these components, because the

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Speaker 1: barriers to entry are quite high. And that's really the

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Speaker 1: bread and butter of Foxcon. Even to this day, they

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Speaker 1: make a lot of money from an iPhone from the

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Speaker 1: components that go inside an iPhone rather than actually assembling

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Speaker 1: an iPhone. How did Apple find fox came well? When

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Speaker 1: Steve Jobs came back. Um, as we all know, the

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Speaker 1: company was in trouble. They Apple was actually making their computers,

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Speaker 1: like physically making them in California. But over the over

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Speaker 1: a period of time, many companies, um, you know, Michael

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Speaker 1: Dell and Heller, Packard, Compact and others were starting to

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Speaker 1: outsource to Asia. And at some point during that period

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Speaker 1: of time, Tim Cork who was who was operating officer

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Speaker 1: at the time, he had not yet become CEO, would

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Speaker 1: have discovered fox con and realized that, you know, these

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Speaker 1: these guys make the components, we should probably get to

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Speaker 1: know them. And they really jumped into bed deeply when

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Speaker 1: the iPod came out in the early two thousand's and

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Speaker 1: that was one of the really the first high high

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Speaker 1: high volume electronics product after maybe um you know, the

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Speaker 1: Sony Walkman, and no one else really had the kind

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Speaker 1: of scale in n Jen to do it. So it

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Speaker 1: was really started with the iPod era and it was

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Speaker 1: only the iPhone that came almost a decade later, or

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Speaker 1: less than a decade later. And when you know, Tim

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Speaker 1: Cook needed someone to assemble this new gadget that nobody

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Speaker 1: had ever heard of but heard rumors of Fox and

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Speaker 1: was the place to go well on this question of

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Speaker 1: like assembly. So you know, I'm sort of thinking about

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Speaker 1: like actually our Taiwan Semi conversation, and you know Taiwan Semi.

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Speaker 1: You know, just like over time like builds up an

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Speaker 1: expertise to be able to manufacture chips at scale while

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Speaker 1: making very few errors, and they just become really good

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Speaker 1: at it. What is like, is it similar with fox

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Speaker 1: con where just over time they just sort of build

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Speaker 1: up this internal muscle or you know, you can come

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Speaker 1: up with a new design. Here's the design of an iPhone,

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Speaker 1: or sorry, here's the design of an iPod, And because

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Speaker 1: they've just like built up this sort of like internal

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Speaker 1: tacit knowledge of how to assemble things, It's just no

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Speaker 1: one else can really do something like that at scale

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Speaker 1: and have to be consistently good precisely. That's really really it.

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Speaker 1: It's it's not that difficult to make one pizza. Try

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Speaker 1: and make fifty pizzas and now or you know, a

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Speaker 1: thousand pizzas, and now that's difficult because quality yield, right,

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Speaker 1: the amount of products that you put through the production

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Speaker 1: line that are usable at the end, that is very

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Speaker 1: very difficult. Scale is really what it's all about in

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Speaker 1: pretty much any industry, even in cars. You know, Tesla's

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Speaker 1: struggles over the years have been about scaling, and so, yeah,

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Speaker 1: you're right. They had built up this this knowledge base

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Speaker 1: from making components so that when it came to things

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Speaker 1: that were a bit more labor intensive, and they had

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Speaker 1: used a lot of labor even for their components, this

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Speaker 1: was the company that you would turn to. And you know,

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Speaker 1: what is it a dozen years after the first iPhone

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Speaker 1: came out, seventy iPhones are still made by Foxcon. Right,

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Speaker 1: the Apple can't replace them. They're addicted to fox Con.

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Speaker 1: I was going to ask what is the relationship like

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Speaker 1: between those two entities, because on the one hand, okay,

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Speaker 1: fox Con providing a valuable service for Apple, clearly, but

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Speaker 1: it feels like Apple is basically reliant on one supplier here. Yeah,

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Speaker 1: I mean, it's it's it's a possibly an unhealthy I've

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Speaker 1: argued for a long time, it's a very unhealthy codependence. Um,

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Speaker 1: you know, there is really if you look at the

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Speaker 1: tech industry globally or of the world in general. Um,

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Speaker 1: you know, if if Apple was to disappear overnight, um,

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Speaker 1: you know, we wouldn't get our ophines, and you know,

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Speaker 1: maybe that wouldn't be a very nice thing, or Facebook

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Speaker 1: disappeared that would be terrible, or some people might argue

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Speaker 1: the opposite. But if if fox Con or t SMC

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Speaker 1: were to disappear from the face of the earth overnight,

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Speaker 1: we've been a lot of trouble because nobody can do

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Speaker 1: what these two companies can do, and they even if

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Speaker 1: they tried, and so many companies have been trying to

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Speaker 1: replace fox Con. Apple doesn't want to be addicted to

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Speaker 1: fox Con, right, It's just not healthy. It's not about

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Speaker 1: them being a good or a bad company. It's just

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Speaker 1: not healthy to have one supplier. So over the years,

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Speaker 1: Apple has diversified away, ironically to mostly Taimeanese companies like

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Speaker 1: with Troyn and Pegatron, and some Chinese companies too, uh.

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Speaker 1: And of course they have diversified away from China to

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Speaker 1: an extent in India and Brazil and other places. But

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Speaker 1: really they can't help it. And fox Con is also

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Speaker 1: unhealthily addicted to a fifty percent of their revenue comes

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Speaker 1: from Apple, uh, and it's been that way for more

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Speaker 1: than a decade. They brought in about two hundred and

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Speaker 1: fifteen billion dollars of revenue last year fox Con and

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Speaker 1: half of that came from Apple, So they can't do

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Speaker 1: that Apple unless they get into the EV business. The

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Speaker 1: hottest gadget or one of the hottest gadgets in the

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Speaker 1: world right now is the electric vehicle, and Tesla is

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Speaker 1: the leader. But we know that every uh, every car company,

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Speaker 1: um wants to get into e v s and they're

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Speaker 1: spending a lot of money and actually rolling out cars

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Speaker 1: and some of them seem to be decent. Before we

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Speaker 1: get into fox CON's ambitions in the space, how is

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Speaker 1: manufacturing a car historically different than manufacturing electron I mean,

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Speaker 1: my guess is, like GM and Ford at all, they

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Speaker 1: have their own plants, they're in the United States. They

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Speaker 1: don't just like make a design and send it to

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Speaker 1: some other company to build. They actually build it themselves.

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Speaker 1: But how would you compare and contrast the sort of

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Speaker 1: like existing legacy approach to building a car versus the

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Speaker 1: existing approach to building a phone. Well, at the end

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Speaker 1: of the day, yeah, no, I think it's a fair

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Speaker 1: point at the end of the day. I mean, car

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Speaker 1: companies don't want to admit it, but all cars are

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Speaker 1: kind of similar, right um now, where there is a

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Speaker 1: differences in engines. Right, So companies like Toyota and Ford

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Speaker 1: and the Europeans as well, have have worked a lot

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Speaker 1: on on engine design and and car buffs will say, well,

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Speaker 1: this engine, this you know V six or this straightforward

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Speaker 1: whatever is is a better engine. And a new car

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Speaker 1: comes out with a new engine and people love it

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Speaker 1: or hate it. But the other part, that kind of

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Speaker 1: the the I P is in how you make it.

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Speaker 1: And Toyota, i guess, is most famous for their production

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Speaker 1: system that just in time and all of that um

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Speaker 1: and again it comes back to the issue of scale

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Speaker 1: and quality and yields and so forth. So the very

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Speaker 1: process of producing a car is in some ways that

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Speaker 1: secret source. And so if Toyota, for example, or Ford

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Speaker 1: was to work out exactly the right way to make

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Speaker 1: a car over and say a ten year production run, um,

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Speaker 1: it's kind of a thing that they wouldn't necessarily want

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Speaker 1: to hand out to somebody else. But the other thing

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Speaker 1: is with safety standards. Um, you have to be very meticulous,

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Speaker 1: and the way you produce a car is so connected

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Speaker 1: to things like safety standards. And the final thing is, um,

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Speaker 1: the product cycle of a car is much much much longer.

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Speaker 1: We're talking like a decade, whereas you know the product

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Speaker 1: cycle of a phone iPhone, Apple has the longest product cycle,

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Speaker 1: which is about a year. But you know Samsung and

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Speaker 1: shower Me or whatever, they come out with a new

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Speaker 1: product like every three to six months or even less.

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Speaker 1: So it's a very quick turnaround, and so they kind

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Speaker 1: of need the external help to help put these devices together.

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Speaker 1: I think that's really the difference. So walk us through

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Speaker 1: fox CON's thinking here and what they see exactly as

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Speaker 1: their competitive advantage. Because on the one hand, yes, EV

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Speaker 1: is very hot right now, everyone is probably going to

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Speaker 1: end up having one in the future. But on the

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Speaker 1: other hand, especially in places like Asia, the market is

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Speaker 1: incredibly crowded. It feels like a new EV manufacturer springs up,

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Speaker 1: you know, every week or every month and then probably

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Speaker 1: has problems soon after. But what exactly is the opportunity

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Speaker 1: here and what does fox Can think it can do

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Speaker 1: better than other EV manufacturers. Well, what's interesting, I think

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Speaker 1: is that you think a fox Can has being the

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Speaker 1: iPhone assembler, and you think, wow, if they're going to

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Speaker 1: do evs, they're going to be all about the e

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Speaker 1: V assembling with big factories like you'd see in Detroit,

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Speaker 1: that's actually not quite their thinking. They are more thinking

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Speaker 1: in the nineties model, which is in the ES when

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Speaker 1: desktop PCs were, you know, the biggest thing out there.

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Speaker 1: It was very modular. You open up a PC and

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Speaker 1: it's very very modular, and you've got standard reference designs

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Speaker 1: for what it would look like. And you know at

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Speaker 1: that time you have you know, m D and Intel,

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Speaker 1: we're doing the CPUs ah and fox Con could make

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Speaker 1: a lot of those component parts and get good margins

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Speaker 1: on it. They see e vs more similar to PCs

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Speaker 1: than iPhones, and so they have reference designs. Right, if

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Speaker 1: you want to go out like literally, if you had

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Speaker 1: the money, you could call up fox Com tomorrow and say, hey,

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Speaker 1: we want to make an EV. We don't have a clue,

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Speaker 1: We've just got money, and fox going to like, all right,

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Speaker 1: we've got a reference design. Literally, it is a design.

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Speaker 1: It's a chassis with four wheels, and they can basically

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Speaker 1: walk you through the process and for the right amount

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Speaker 1: of money, you could have an EV, you know, in

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Speaker 1: six months. And that's why you've got companies like Lordstown

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Speaker 1: and Ribbing and all these other startups are actually turning

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Speaker 1: to fox Con and saying, oh um, yeah, we we

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Speaker 1: want to get into the e V business, maybe we

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Speaker 1: would you know, get into bed with each other. Well,

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Speaker 1: so when I think about like PCs in the nineties,

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Speaker 1: and there were just so many of these brands and

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Speaker 1: they basically just all sold the exact same boxes and

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Speaker 1: it didn't turn out to be So there was Compact,

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Speaker 1: an HP and or before that, I guess there was

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Speaker 1: like yeah, tons of Gateway was another one, uh and

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Speaker 1: then of course Dell more or less one that space.

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Speaker 1: But it was like not a great victory because the

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Speaker 1: actual like boxes, you know, they won, but it wasn't

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Speaker 1: like the most amazing victory. Like do the car companies like, okay,

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Speaker 1: if Fox if Fox CON's vision that evs will sort

429
00:23:39,040 --> 00:23:41,479
Speaker 1: of be this modular thing and there's a few standard

430
00:23:41,520 --> 00:23:44,040
Speaker 1: parts that they could all plug and play, Like, do

431
00:23:44,119 --> 00:23:47,240
Speaker 1: car companies want that future? Now? Of course, car companies

432
00:23:47,280 --> 00:23:49,879
Speaker 1: don't want that future anymore than PC companies want to

433
00:23:49,920 --> 00:23:53,919
Speaker 1: have PCs to be modular because there's no competitive advantage.

434
00:23:53,920 --> 00:23:56,240
Speaker 1: And that's why Apple went you know in another directions,

435
00:23:56,280 --> 00:24:00,199
Speaker 1: remember Zeos, there was PCs. That's what we had. We

436
00:24:00,280 --> 00:24:02,760
Speaker 1: had a we had a PC. And in my family,

437
00:24:02,800 --> 00:24:08,920
Speaker 1: I think it's a company. Remember Tandy we had Yeah, so,

438
00:24:09,119 --> 00:24:12,399
Speaker 1: um so, no PC company, no company wants wants to

439
00:24:12,400 --> 00:24:15,520
Speaker 1: be standardized, right, They want to have everything to themselves.

440
00:24:15,560 --> 00:24:17,720
Speaker 1: In fact, you know, if you look inside an iPhone,

441
00:24:18,560 --> 00:24:20,199
Speaker 1: um you know, one of the funny things about an

442
00:24:20,200 --> 00:24:22,359
Speaker 1: iPhone is, of course they have their own chips, a

443
00:24:22,400 --> 00:24:24,760
Speaker 1: lot of their own things are very very specific to Apple.

444
00:24:25,160 --> 00:24:27,000
Speaker 1: But in fact, there's there's quite a few components that

445
00:24:27,040 --> 00:24:28,879
Speaker 1: go on an iPhone that are no different to a

446
00:24:28,880 --> 00:24:31,840
Speaker 1: component that going to something else. But but Apple is

447
00:24:31,960 --> 00:24:34,240
Speaker 1: very insistent with their supplies that they have their own

448
00:24:34,240 --> 00:24:38,200
Speaker 1: stock coding unit and it's labeled differently, but it's basically

449
00:24:38,240 --> 00:24:40,920
Speaker 1: the same part. It's just kind of the Apple version

450
00:24:40,960 --> 00:24:44,760
Speaker 1: of that part. So I think absolutely, I don't think

451
00:24:44,840 --> 00:24:48,000
Speaker 1: you know, Elon, Musket, Tesla or Toyota or Ford or

452
00:24:48,040 --> 00:24:51,480
Speaker 1: any company that's going into the e vy era wants

453
00:24:51,480 --> 00:24:54,520
Speaker 1: to have it standardized. But then again, they've got to

454
00:24:54,520 --> 00:24:57,320
Speaker 1: make decisions where is our value add where is that

455
00:24:57,440 --> 00:25:00,520
Speaker 1: competitive advantage is it to have you know, all our

456
00:25:00,640 --> 00:25:04,160
Speaker 1: unique components. And in the car era, having your own

457
00:25:04,240 --> 00:25:08,199
Speaker 1: unique engine, you know, was a standout right and that

458
00:25:08,320 --> 00:25:11,280
Speaker 1: was a unique selling point I think so far in

459
00:25:11,320 --> 00:25:14,199
Speaker 1: the e V era. I don't think anyone's going up

460
00:25:14,200 --> 00:25:15,840
Speaker 1: to an e V and going, well, this is, you know,

461
00:25:15,880 --> 00:25:19,240
Speaker 1: the the electronic version of you know, a V eight. Right.

462
00:25:19,280 --> 00:25:21,840
Speaker 1: They of course they want range, they want power, they

463
00:25:21,880 --> 00:25:24,560
Speaker 1: want what is it ridiculous mode and stuff like that.

464
00:25:25,320 --> 00:25:27,119
Speaker 1: But if that can all be done in a in

465
00:25:27,160 --> 00:25:30,639
Speaker 1: a standardized, modular way, then that would free up the

466
00:25:30,640 --> 00:25:33,160
Speaker 1: e V makers to focus on the front team, which

467
00:25:33,200 --> 00:25:36,919
Speaker 1: is the design, make it look cool, feature set, and

468
00:25:36,920 --> 00:25:39,040
Speaker 1: then the back end, which is sales and marketing. And

469
00:25:39,160 --> 00:25:43,440
Speaker 1: essentially that's what the PC industry is now. PC makers

470
00:25:43,760 --> 00:25:48,280
Speaker 1: basically don't make anything. In fact, Apple doesn't really manufacture anything.

471
00:25:49,240 --> 00:25:51,600
Speaker 1: They do the front team, which is the design. They

472
00:25:51,600 --> 00:25:54,080
Speaker 1: outsourced all of the middle which is you know, putting

473
00:25:54,080 --> 00:25:56,200
Speaker 1: it all together, and in the back end they worry

474
00:25:56,240 --> 00:25:59,439
Speaker 1: about sales and marketing. And that's probably going to be

475
00:25:59,480 --> 00:26:01,360
Speaker 1: the future of EV is certainly the way fox Con

476
00:26:01,400 --> 00:26:03,920
Speaker 1: thinks it will be. And so there was all these

477
00:26:03,920 --> 00:26:06,040
Speaker 1: PC makers in the nineties and most of them have

478
00:26:06,160 --> 00:26:09,440
Speaker 1: disappeared or fox gone still around, and they's just applied

479
00:26:09,440 --> 00:26:11,280
Speaker 1: to all of them, right, that's the way they survive.

480
00:26:11,760 --> 00:26:14,679
Speaker 1: Fox Con doesn't do their own branding. They just apply

481
00:26:14,840 --> 00:26:17,520
Speaker 1: to the brands and the new vision of fox Con.

482
00:26:17,520 --> 00:26:20,680
Speaker 1: And they've got a new chairman now, a guy called

483
00:26:21,000 --> 00:26:24,200
Speaker 1: you know, Young Way, who's who's an electronic engineer by training.

484
00:26:24,920 --> 00:26:28,040
Speaker 1: He sees that future as being fox Con is not

485
00:26:28,080 --> 00:26:30,280
Speaker 1: going back to the mid two thousands, but fox going

486
00:26:30,320 --> 00:26:33,439
Speaker 1: back to the mid nineties. Guess what, that's when the

487
00:26:33,480 --> 00:26:37,719
Speaker 1: margins were really really good. That's convenient. But it feels

488
00:26:37,720 --> 00:26:41,560
Speaker 1: like to some extent, the EV manufacturers might not have

489
00:26:41,640 --> 00:26:44,719
Speaker 1: a choice here, right because chips have been an issue,

490
00:26:45,320 --> 00:26:47,879
Speaker 1: and if one of the largest suppliers of chips says

491
00:26:48,080 --> 00:26:50,119
Speaker 1: we want to go in this direction, We're going to

492
00:26:50,240 --> 00:26:54,560
Speaker 1: standardize to modular component building that sort of thing, it

493
00:26:54,600 --> 00:26:57,840
Speaker 1: feels like they might just have to go along with it, Right, Yeah,

494
00:26:57,880 --> 00:26:59,399
Speaker 1: I think so. I think that's a good way to

495
00:26:59,400 --> 00:27:03,280
Speaker 1: put a treaty. You if the EV industry it is

496
00:27:03,440 --> 00:27:06,560
Speaker 1: very very electronic, right, you know, every wheel has multiple

497
00:27:06,640 --> 00:27:09,560
Speaker 1: chips just controlling it. Right, Um, cars there is more.

498
00:27:09,920 --> 00:27:11,919
Speaker 1: There's more chips in your garage and there is in

499
00:27:11,960 --> 00:27:14,720
Speaker 1: your lounge room. Right. There is so many chips inside cars,

500
00:27:14,760 --> 00:27:17,320
Speaker 1: which is why with the chip shortage of the last

501
00:27:17,320 --> 00:27:20,240
Speaker 1: couple of years, cars couldn't roll off the production line, right,

502
00:27:20,840 --> 00:27:23,680
Speaker 1: but we still managed to get our iPhones. And so

503
00:27:23,880 --> 00:27:27,040
Speaker 1: the e V era is definitely more and more electronic.

504
00:27:27,400 --> 00:27:30,040
Speaker 1: And that's why in so many ways, and e v

505
00:27:30,359 --> 00:27:34,439
Speaker 1: is more like a PC on wheels than then a

506
00:27:34,480 --> 00:27:37,840
Speaker 1: Toyota af Ford with an electronic engine. Really, that's the

507
00:27:37,840 --> 00:27:39,800
Speaker 1: way you need to think about it. Certainly, that's the

508
00:27:39,800 --> 00:27:41,520
Speaker 1: way a lot of companies think about and that's the

509
00:27:41,520 --> 00:27:45,520
Speaker 1: way Fox Coon thinks about it. And that's why componentary

510
00:27:45,640 --> 00:27:51,600
Speaker 1: semiconductors are non semic conductor components. There will be standardization

511
00:27:52,160 --> 00:27:54,639
Speaker 1: in theory. That's that's where the industry is moving. And

512
00:27:54,680 --> 00:27:57,040
Speaker 1: that's what foxcon wants to do. They have a platform

513
00:27:57,119 --> 00:27:59,560
Speaker 1: called m I H. They want to bring all of

514
00:27:59,600 --> 00:28:01,240
Speaker 1: the company needs together. They want to bring in the

515
00:28:01,280 --> 00:28:04,600
Speaker 1: chip makers, not just the carmakers, the chipmakers, the electronic makers.

516
00:28:05,000 --> 00:28:06,840
Speaker 1: They want to bring them all together and set the

517
00:28:06,920 --> 00:28:09,880
Speaker 1: standards and say we've got these standards. You can buy

518
00:28:09,920 --> 00:28:12,320
Speaker 1: some of the components from us and some from somewhere else.

519
00:28:12,359 --> 00:28:14,479
Speaker 1: Not a problem. You can buy all the components from

520
00:28:14,560 --> 00:28:17,399
Speaker 1: us whatever you like. But fox con wants to be

521
00:28:17,440 --> 00:28:21,160
Speaker 1: a part of it. So that as today, apart from iPhone.

522
00:28:21,480 --> 00:28:23,840
Speaker 1: Pretty much every device you've got, whether it's a Dell

523
00:28:23,920 --> 00:28:30,040
Speaker 1: PC or or a Cisco router or some webcam, there's

524
00:28:30,119 --> 00:28:33,200
Speaker 1: probably some fox Con in there somewhere. That's what fox

525
00:28:33,280 --> 00:28:36,280
Speaker 1: Con wants to be for e vs. So I'm guessing

526
00:28:36,600 --> 00:28:40,640
Speaker 1: this is a well I'm guessing Ellen, they're not part

527
00:28:40,680 --> 00:28:43,080
Speaker 1: of Elion's vision, Like, how does how does the fox

528
00:28:43,160 --> 00:28:47,080
Speaker 1: cond vision of how the EV industry evolved contrast with

529
00:28:47,160 --> 00:28:49,720
Speaker 1: Elon's vision of how the EV industry will evolve? Well,

530
00:28:49,760 --> 00:28:52,400
Speaker 1: interestingly enough, fox Con does supply to Tesla, but it's

531
00:28:52,400 --> 00:28:56,080
Speaker 1: just componentry um, not the final car. Now. Ellen said

532
00:28:56,360 --> 00:28:58,880
Speaker 1: famously a few years ago, you know, evs are tough.

533
00:28:58,920 --> 00:29:00,600
Speaker 1: This is not the kind of thing you can you

534
00:29:00,600 --> 00:29:04,120
Speaker 1: can outsource to fox Con. I actually disagree. Fox Con

535
00:29:04,120 --> 00:29:05,920
Speaker 1: obviously disagrees. I think it is the kind of thing

536
00:29:05,960 --> 00:29:08,360
Speaker 1: you can outsource to fox Con. It's exactly the kind

537
00:29:08,360 --> 00:29:10,920
Speaker 1: of thing you can outsource to fox Con. Now, of course,

538
00:29:10,920 --> 00:29:13,600
Speaker 1: Tesla makes their own cars. They're they're building multiple factories

539
00:29:13,640 --> 00:29:16,240
Speaker 1: around the world, and they believe that building cars is

540
00:29:16,320 --> 00:29:20,920
Speaker 1: part of you know, the Tesla DNA and their competitive advantage.

541
00:29:21,960 --> 00:29:24,120
Speaker 1: But if you if your fox Con or any of

542
00:29:24,160 --> 00:29:28,200
Speaker 1: these other startups, then you probably think maybe not. And

543
00:29:28,240 --> 00:29:30,959
Speaker 1: certainly to build your own car factory is is very,

544
00:29:31,080 --> 00:29:33,840
Speaker 1: very expensive and there's no guarantee of payoff. Now what's

545
00:29:33,920 --> 00:29:39,040
Speaker 1: interesting is how about the existing legacy car makers like

546
00:29:39,080 --> 00:29:42,000
Speaker 1: the Europeans and the Japanese, the Koreans and of the Americans.

547
00:29:42,040 --> 00:29:45,480
Speaker 1: Do they still want to make their own cars or

548
00:29:45,520 --> 00:29:47,520
Speaker 1: will they at some point say, you know what, We're

549
00:29:47,520 --> 00:29:50,160
Speaker 1: going to outsource a couple of models of our cars

550
00:29:50,440 --> 00:29:54,000
Speaker 1: to somebody else, like a fox Con. So one of

551
00:29:54,080 --> 00:29:57,560
Speaker 1: fox CON's partners is Stalantis, which is the merged group

552
00:29:57,640 --> 00:30:00,880
Speaker 1: of of p s A and renown A, the European

553
00:30:00,920 --> 00:30:04,480
Speaker 1: car makers. They are actually doing deals with fox Con.

554
00:30:04,600 --> 00:30:08,040
Speaker 1: So we may see, you know, a European car come

555
00:30:08,040 --> 00:30:11,120
Speaker 1: off for a fox Con production line in future, or

556
00:30:11,160 --> 00:30:14,680
Speaker 1: certainly some of the components in these European cars may

557
00:30:14,720 --> 00:30:17,200
Speaker 1: be made by fox Con. So I think the interesting

558
00:30:17,280 --> 00:30:19,800
Speaker 1: question is not the startups who kind of need to

559
00:30:19,840 --> 00:30:23,040
Speaker 1: have a fox Con, it's the legacy makers. Are they

560
00:30:23,120 --> 00:30:25,840
Speaker 1: willing to embrace the fox com model and frank out

561
00:30:26,160 --> 00:30:41,320
Speaker 1: The answer to this might be an obvious point, but

562
00:30:41,560 --> 00:30:44,360
Speaker 1: part of the thing that is sort of surprising me

563
00:30:44,480 --> 00:30:47,120
Speaker 1: here or I guess I should say the irony here

564
00:30:47,280 --> 00:30:50,360
Speaker 1: is that it seems like we've had these discussions over

565
00:30:50,360 --> 00:30:54,760
Speaker 1: the past few years about supply chain resiliency, We've had

566
00:30:54,760 --> 00:31:00,240
Speaker 1: discussions about the semiconductor shortage, and it feels like the

567
00:31:00,400 --> 00:31:05,760
Speaker 1: response to all of that might be to concentrate semiconductor

568
00:31:05,800 --> 00:31:12,080
Speaker 1: production and assembly even more in a single entity. Um

569
00:31:12,120 --> 00:31:16,600
Speaker 1: because they're sort of demanding market power or the ability

570
00:31:16,600 --> 00:31:19,600
Speaker 1: to assemble cars in order to control the components that

571
00:31:19,680 --> 00:31:22,960
Speaker 1: are going into them. Is that is that the direction

572
00:31:23,560 --> 00:31:28,080
Speaker 1: that we're heading, Like, rather than see multiple competitors spring

573
00:31:28,160 --> 00:31:30,880
Speaker 1: up in the space people start to retool their supply

574
00:31:30,960 --> 00:31:33,840
Speaker 1: chains so that they don't rely on a single company,

575
00:31:34,080 --> 00:31:37,000
Speaker 1: it feels like we're going in the other direction. Well,

576
00:31:37,400 --> 00:31:39,280
Speaker 1: if you look at t SMC, I mean, they have

577
00:31:39,520 --> 00:31:45,640
Speaker 1: like of the leading, leading, leading edge capacity. But interestingly enough,

578
00:31:46,240 --> 00:31:48,120
Speaker 1: that is not the type of ships that have chips

579
00:31:48,120 --> 00:31:50,480
Speaker 1: that have been in shortage. It's that the old stuff

580
00:31:50,520 --> 00:31:53,000
Speaker 1: that the technology that's in ten or fifteen years old

581
00:31:53,400 --> 00:31:56,400
Speaker 1: that's been in shortage. And one of the reasons why

582
00:31:56,400 --> 00:31:58,920
Speaker 1: it's in shortage is because people have been moving forward,

583
00:31:58,960 --> 00:32:00,920
Speaker 1: you know, the chip industry as as you guys have

584
00:32:01,000 --> 00:32:03,400
Speaker 1: spoken about quite a few times. It's a very fast

585
00:32:03,400 --> 00:32:06,320
Speaker 1: moving industry. You know, Moore's law means that every couple

586
00:32:06,320 --> 00:32:09,080
Speaker 1: of years you upgrade your technology. But a lot of

587
00:32:09,120 --> 00:32:12,080
Speaker 1: the chip designers didn't really want to move up the

588
00:32:12,160 --> 00:32:14,600
Speaker 1: supply chain or you know, the technology stick because they

589
00:32:14,680 --> 00:32:17,600
Speaker 1: didn't need to. So that's where we are with the shortage.

590
00:32:18,160 --> 00:32:21,320
Speaker 1: But going forward, I think there's going to be a

591
00:32:21,320 --> 00:32:25,320
Speaker 1: lot of government involvement. Obviously, the US government Congress is

592
00:32:25,400 --> 00:32:28,400
Speaker 1: kind of duking it out over the Chips package that

593
00:32:28,520 --> 00:32:32,320
Speaker 1: Chips Act. Europeans are doing a similar one. They would

594
00:32:32,400 --> 00:32:36,400
Speaker 1: like to have control of the chip industry in more companies,

595
00:32:36,480 --> 00:32:39,440
Speaker 1: or at least in companies from from their domiciles. So

596
00:32:39,480 --> 00:32:42,400
Speaker 1: obviously Intel wants to get in on the game. There's

597
00:32:42,440 --> 00:32:45,760
Speaker 1: European makers, but at the same time they all everybody

598
00:32:45,760 --> 00:32:48,680
Speaker 1: wants a t SMC factor in their backyard, right t

599
00:32:48,880 --> 00:32:51,840
Speaker 1: SEMC is the most popular company in the world for

600
00:32:51,840 --> 00:32:56,640
Speaker 1: for you know, economic economy ministers, because they all want

601
00:32:56,680 --> 00:32:59,840
Speaker 1: to get t SMC over there. But if you look

602
00:32:59,880 --> 00:33:04,880
Speaker 1: at fox Con, what's interesting with cars is, you know,

603
00:33:04,880 --> 00:33:07,400
Speaker 1: it's just not as easy that you can't pack up

604
00:33:07,440 --> 00:33:09,240
Speaker 1: sixty cars in a box and put them on a

605
00:33:09,600 --> 00:33:14,160
Speaker 1: on a FedEx slide. Right, So this is a really

606
00:33:14,920 --> 00:33:20,080
Speaker 1: smart way for fox Con to to diversify geographically. Now,

607
00:33:20,200 --> 00:33:21,960
Speaker 1: no matter what you think of the tech cold War,

608
00:33:22,120 --> 00:33:26,480
Speaker 1: is it overblown? Is it unfair? Will blow over? Um,

609
00:33:26,520 --> 00:33:29,160
Speaker 1: It's really not smart to have all of your supply

610
00:33:29,240 --> 00:33:31,160
Speaker 1: chain in one area. In the same way, it's not

611
00:33:31,200 --> 00:33:34,120
Speaker 1: smart to have so much of your supply from one

612
00:33:34,200 --> 00:33:37,640
Speaker 1: or two companies like fox Con and tier SMC. It

613
00:33:37,760 --> 00:33:39,959
Speaker 1: just doesn't make sense to have all of the supply

614
00:33:40,080 --> 00:33:42,880
Speaker 1: chain in you know, the Shenjen area or jung Jol

615
00:33:42,920 --> 00:33:47,040
Speaker 1: area of China. Fox Con knows that. But by moving

616
00:33:47,080 --> 00:33:49,200
Speaker 1: into e V s as they are, they've you know,

617
00:33:49,200 --> 00:33:51,920
Speaker 1: they've got a plant in Ohio, They've got this factory

618
00:33:51,920 --> 00:33:54,160
Speaker 1: in Wisconsin which may or may not make e vs.

619
00:33:54,240 --> 00:33:56,960
Speaker 1: They're looking at India and Indonesia and we'll probably see

620
00:33:57,000 --> 00:34:01,520
Speaker 1: something in I would guess, Mexico East in Europe. Great

621
00:34:01,520 --> 00:34:06,800
Speaker 1: way to diversify your geographical locations because it makes sense

622
00:34:06,840 --> 00:34:09,399
Speaker 1: to have your car production closer to where your your

623
00:34:09,440 --> 00:34:11,759
Speaker 1: market will be. Yeah, I want to expand on this

624
00:34:11,840 --> 00:34:14,040
Speaker 1: further because like right, like if you think about as

625
00:34:14,040 --> 00:34:17,960
Speaker 1: you mentioned, uh, the era where they're selling like, you know,

626
00:34:18,080 --> 00:34:21,680
Speaker 1: millions of dollar capacitors by the bucket, and that's very

627
00:34:21,760 --> 00:34:26,400
Speaker 1: easy to manufacture in shen Zen and then put on

628
00:34:26,480 --> 00:34:30,920
Speaker 1: a boat. Clearly, the geography of automobile manufacturing is already

629
00:34:31,000 --> 00:34:35,760
Speaker 1: much more localized. And you don't see GM or Ford

630
00:34:36,719 --> 00:34:39,600
Speaker 1: manufacture car in China for the purpose of shipping it

631
00:34:39,640 --> 00:34:41,400
Speaker 1: to the United States that they set of factories in

632
00:34:41,440 --> 00:34:45,879
Speaker 1: Georgia or Tennessee and still in Michigan or elsewhere. And

633
00:34:45,960 --> 00:34:50,480
Speaker 1: so it does seem as though this would yeah, I mean,

634
00:34:51,080 --> 00:34:55,240
Speaker 1: the economic the weight of car components just this year, size,

635
00:34:56,040 --> 00:34:58,719
Speaker 1: the cause of them, um, it seems like it has

636
00:34:58,760 --> 00:35:02,960
Speaker 1: to be much more geographically dispersed. Yeah. Absolutely, And and

637
00:35:03,000 --> 00:35:06,719
Speaker 1: that's just a really nice segue for fox Con to

638
00:35:06,920 --> 00:35:11,680
Speaker 1: have less of their production capacity in one geography. Uh.

639
00:35:11,719 --> 00:35:14,840
Speaker 1: And they don't have to be announcing that they're picking

640
00:35:14,880 --> 00:35:17,680
Speaker 1: up and leaving China. They just you know, all of

641
00:35:17,719 --> 00:35:20,120
Speaker 1: their extra every extra dollar of capex that they put

642
00:35:20,120 --> 00:35:22,600
Speaker 1: into something over the next few years just happens to

643
00:35:22,640 --> 00:35:25,920
Speaker 1: not be in China for for solid economic reasons. And

644
00:35:25,960 --> 00:35:29,360
Speaker 1: so I would predict that, say, ten years from now,

645
00:35:30,440 --> 00:35:32,839
Speaker 1: a lot less of its balance sheet in terms of

646
00:35:32,880 --> 00:35:35,600
Speaker 1: factory and equipment will be in China, and it won't

647
00:35:35,600 --> 00:35:38,080
Speaker 1: be a case of them upping and leaving China, will

648
00:35:38,160 --> 00:35:41,160
Speaker 1: just be a natural kind of evolution away from China.

649
00:35:41,520 --> 00:35:44,759
Speaker 1: And I think that's exactly what fox Con and its

650
00:35:44,800 --> 00:35:50,000
Speaker 1: clients would want. So I know you talked about, um

651
00:35:50,040 --> 00:35:53,920
Speaker 1: the sort of the historical experience that lends itself to

652
00:35:54,000 --> 00:35:57,920
Speaker 1: fox Con moving into this area of evy assembly sort

653
00:35:57,920 --> 00:36:00,120
Speaker 1: of doing a similar thing to what they did with

654
00:36:00,320 --> 00:36:05,439
Speaker 1: PCs in the nineties. But are there any stumbling blocks here,

655
00:36:05,560 --> 00:36:08,880
Speaker 1: like what is the biggest challenge in moving to that

656
00:36:09,000 --> 00:36:12,799
Speaker 1: production model? I think one of them, Um, that's that's

657
00:36:12,800 --> 00:36:15,160
Speaker 1: a really good point, and that's the kind of thing

658
00:36:15,320 --> 00:36:18,719
Speaker 1: that probably even catch out fox Con. And I think

659
00:36:18,760 --> 00:36:22,360
Speaker 1: one of them is regulation. Cars are very very regulated,

660
00:36:22,480 --> 00:36:26,560
Speaker 1: right um in terms of safety standards. You know, there

661
00:36:26,719 --> 00:36:29,400
Speaker 1: was emission standards, but obviously that doesn't quite apply to

662
00:36:29,440 --> 00:36:33,120
Speaker 1: e v s, but there's various types of standards. And

663
00:36:33,200 --> 00:36:35,600
Speaker 1: if you're going through the process of setting up a

664
00:36:35,680 --> 00:36:41,040
Speaker 1: reference design, UM and you're slotting in different components, even

665
00:36:41,280 --> 00:36:43,399
Speaker 1: like what kind of seats and you know the seats

666
00:36:43,480 --> 00:36:48,480
Speaker 1: going to buckle up electronically or breaking and all the

667
00:36:48,480 --> 00:36:52,200
Speaker 1: other things like, for example, Tesla had a minor problem

668
00:36:52,239 --> 00:36:56,759
Speaker 1: recently where the chip inside that center console was kind

669
00:36:56,760 --> 00:36:59,600
Speaker 1: of overheating, and that made it difficult because everything is

670
00:36:59,640 --> 00:37:02,680
Speaker 1: control by the center console of a Tesla UM you

671
00:37:02,800 --> 00:37:05,920
Speaker 1: basically kind of had to reboot the car to to

672
00:37:06,080 --> 00:37:09,880
Speaker 1: make it work. Now, there was no safety issue involved

673
00:37:09,920 --> 00:37:11,799
Speaker 1: in that, but it highlights the issue that as we

674
00:37:11,840 --> 00:37:14,920
Speaker 1: get more and more electronic, the electronics are very important.

675
00:37:15,440 --> 00:37:18,280
Speaker 1: I think we will see safety regulators in the US

676
00:37:18,360 --> 00:37:22,160
Speaker 1: and Europe and elsewhere. I want to be much more

677
00:37:22,239 --> 00:37:27,239
Speaker 1: cognizant of that. And so this could be a real

678
00:37:27,400 --> 00:37:30,080
Speaker 1: problem for Fox Gone, or maybe it's an opportunity for

679
00:37:30,080 --> 00:37:32,560
Speaker 1: Fox Gone, because if they can get into the process

680
00:37:32,640 --> 00:37:37,320
Speaker 1: of getting the parts or components or half assembled cars

681
00:37:38,200 --> 00:37:42,200
Speaker 1: go through that safety standard check and licensing themselves with

682
00:37:42,320 --> 00:37:46,120
Speaker 1: the Europeans or the Americans or Japanese or whomever, then

683
00:37:46,360 --> 00:37:49,320
Speaker 1: they could possibly sell that to the client and say, hey,

684
00:37:49,560 --> 00:37:52,240
Speaker 1: this part of the process, the chassis with the seats

685
00:37:52,239 --> 00:37:55,520
Speaker 1: and the engine have already gone through compliance. It's been

686
00:37:55,600 --> 00:37:59,640
Speaker 1: ticked and signed off. You should buy from us. Or alternatively,

687
00:38:00,600 --> 00:38:04,080
Speaker 1: the carmakers may find that's not working for them because

688
00:38:04,280 --> 00:38:06,759
Speaker 1: you know, Fox con doesn't do that or doesn't provide that,

689
00:38:06,800 --> 00:38:11,880
Speaker 1: and that's the carmakers specialty. They may decide, Actually it's

690
00:38:11,920 --> 00:38:14,360
Speaker 1: still better for us to do this ourselves because the

691
00:38:14,719 --> 00:38:17,880
Speaker 1: design process is very much focused around, you know, safety,

692
00:38:17,920 --> 00:38:21,080
Speaker 1: building in the safety at the start of that process. Now,

693
00:38:21,239 --> 00:38:23,560
Speaker 1: comparing that to the PC area of the nineties, as

694
00:38:23,560 --> 00:38:26,600
Speaker 1: your point out, Tracy, there really wasn't that issue. You know,

695
00:38:26,760 --> 00:38:30,239
Speaker 1: if Michael Dell wants to cobble together a computer, you know,

696
00:38:30,360 --> 00:38:33,400
Speaker 1: in his garage in round Rock, Texas, he doesn't have

697
00:38:33,440 --> 00:38:35,839
Speaker 1: to go off to some regulated who gets signed off

698
00:38:35,880 --> 00:38:38,719
Speaker 1: for safety. And so anyone could put together a PC

699
00:38:39,000 --> 00:38:42,440
Speaker 1: from kind of standard parts. So I think regulation and

700
00:38:42,560 --> 00:38:46,680
Speaker 1: safety standards will probably be the biggest kind of challenge

701
00:38:47,280 --> 00:38:49,719
Speaker 1: the Fox Can anyone, anyone who wants to get into

702
00:38:49,719 --> 00:38:52,000
Speaker 1: the e V space will face. So I just have

703
00:38:52,880 --> 00:38:55,640
Speaker 1: two more questions. One is sort of quick, how big

704
00:38:55,719 --> 00:38:57,680
Speaker 1: is Fox Can I guess I don't know from a

705
00:38:57,719 --> 00:39:00,720
Speaker 1: revenue standpoint these days, And how big does it see

706
00:39:00,880 --> 00:39:03,240
Speaker 1: or how big could this market get or how important

707
00:39:03,280 --> 00:39:06,240
Speaker 1: could it get for Fox Car. So their revenue last

708
00:39:06,320 --> 00:39:11,040
Speaker 1: year was around twoundon fifteen billion U S dollars by comparison,

709
00:39:12,040 --> 00:39:15,960
Speaker 1: Apples was threound sixty three D and seventies, so about

710
00:39:16,000 --> 00:39:21,279
Speaker 1: two thirds of what Apples was. Interestingly, by comparison, uh

711
00:39:21,440 --> 00:39:24,480
Speaker 1: t SMCS revenue last year was only fifty six billions,

712
00:39:24,480 --> 00:39:27,600
Speaker 1: so it's like less than around a quarter of what

713
00:39:27,640 --> 00:39:30,960
Speaker 1: fox Cons was, But of course t SMCS margins are

714
00:39:31,000 --> 00:39:35,120
Speaker 1: exponentially higher. So that's that's putting introspective of where we

715
00:39:35,120 --> 00:39:39,919
Speaker 1: are today. But going forward, Fox con just recently put

716
00:39:39,920 --> 00:39:42,440
Speaker 1: out some of their own targets and they think that

717
00:39:42,480 --> 00:39:45,640
Speaker 1: they are they're targeting to ship five hundred hundred and

718
00:39:45,719 --> 00:39:51,799
Speaker 1: fifty thousand e vs annually by five, and they see

719
00:39:51,840 --> 00:39:56,280
Speaker 1: that translating to thirty four billion US dollars of revenue

720
00:39:56,320 --> 00:39:59,880
Speaker 1: by five, So you know, back of the envelope number,

721
00:40:00,760 --> 00:40:04,560
Speaker 1: that means they would expect revenue of around forty five

722
00:40:04,640 --> 00:40:07,800
Speaker 1: thousand dollars per car. So there's already a pretty significant

723
00:40:07,880 --> 00:40:11,440
Speaker 1: chump of the of their business. Huge. That's huge, right,

724
00:40:11,440 --> 00:40:14,000
Speaker 1: And even if they got really bad margins out of that,

725
00:40:14,040 --> 00:40:16,880
Speaker 1: you know, one percent margins on forty five thousand dollars

726
00:40:17,000 --> 00:40:19,399
Speaker 1: is a lot better than tempercent margins on a one

727
00:40:19,400 --> 00:40:21,799
Speaker 1: thousand dollar IPHI. Yeah, that's it. So then I guess.

728
00:40:21,800 --> 00:40:24,880
Speaker 1: The other question I have too is like the you know,

729
00:40:24,960 --> 00:40:28,960
Speaker 1: the other thing, the big the key component in a

730
00:40:29,360 --> 00:40:31,600
Speaker 1: electric cars obviously the battery, and there's a lot of

731
00:40:31,600 --> 00:40:34,600
Speaker 1: effort a is that an area that they could ever

732
00:40:34,640 --> 00:40:37,040
Speaker 1: get into? Try to get into the battery itself, which

733
00:40:37,040 --> 00:40:40,000
Speaker 1: is really seems like a very tough business. But be

734
00:40:40,480 --> 00:40:44,160
Speaker 1: battery aside, what are the components that they have like

735
00:40:44,239 --> 00:40:47,799
Speaker 1: the best shot at building They are actually in the

736
00:40:47,800 --> 00:40:50,560
Speaker 1: battery business. They're not a huge player. They've developed their

737
00:40:50,560 --> 00:40:53,480
Speaker 1: own battery technology in Taiwan. I didn't even know this

738
00:40:53,719 --> 00:40:56,480
Speaker 1: until just stumbled upon it at at a conference one day,

739
00:40:56,520 --> 00:40:58,400
Speaker 1: and there's this booth with fox Con batteries and like,

740
00:40:58,480 --> 00:41:01,480
Speaker 1: you guys do batteries, Like yeah, and we developing technology.

741
00:41:01,520 --> 00:41:04,440
Speaker 1: It's all chemistry right at the end of the day. Um,

742
00:41:05,200 --> 00:41:06,960
Speaker 1: I don't know if there'll be a big player in it,

743
00:41:07,120 --> 00:41:09,440
Speaker 1: but they certainly have that option. And I guess it

744
00:41:09,520 --> 00:41:11,920
Speaker 1: comes down to who can get the lithium supply, um,

745
00:41:12,680 --> 00:41:14,680
Speaker 1: you know, But in terms of the rest of it,

746
00:41:15,400 --> 00:41:18,040
Speaker 1: I think, um interestingly enough, you go back to their

747
00:41:18,120 --> 00:41:20,520
Speaker 1: roots connectors, Like inside a car, there is a lot

748
00:41:20,520 --> 00:41:22,600
Speaker 1: of connections, there's a lot of wiring I think, if

749
00:41:22,640 --> 00:41:25,279
Speaker 1: you know, we look inside Boweing or an airbus, yet

750
00:41:25,320 --> 00:41:28,360
Speaker 1: there's like miles and miles and miles of cables and

751
00:41:28,400 --> 00:41:31,880
Speaker 1: connectors and stuff. A car is kind of similar. So

752
00:41:32,040 --> 00:41:34,400
Speaker 1: the connectors is definitely a great business for them to

753
00:41:34,480 --> 00:41:36,000
Speaker 1: be in. And then a lot of the components like

754
00:41:36,600 --> 00:41:40,600
Speaker 1: the windscreen, wiper, the lights, all of those things just

755
00:41:40,719 --> 00:41:43,640
Speaker 1: have a little motherboard with some current components solded onto it,

756
00:41:44,080 --> 00:41:47,160
Speaker 1: and so they don't necessarily need to get the big

757
00:41:47,239 --> 00:41:49,480
Speaker 1: ticket items. They could just take off a lot of

758
00:41:49,520 --> 00:41:51,279
Speaker 1: the kind of the smaller items and just get a

759
00:41:51,360 --> 00:41:53,759
Speaker 1: lot of them inside a car and just be that

760
00:41:53,960 --> 00:41:57,520
Speaker 1: company that does know these ten things really really well

761
00:41:57,640 --> 00:42:00,600
Speaker 1: that no one else can do, and and enjoy the

762
00:42:00,640 --> 00:42:04,560
Speaker 1: margins from there. Tim colpen real treat to have you

763
00:42:04,680 --> 00:42:07,160
Speaker 1: here in the studio, and this is totally new for me.

764
00:42:07,200 --> 00:42:09,400
Speaker 1: I had no idea that fox Con was aiming for

765
00:42:09,480 --> 00:42:11,840
Speaker 1: this space, but it seems like an important part of

766
00:42:11,880 --> 00:42:14,840
Speaker 1: the story. So appreciate you coming back on the oddlock.

767
00:42:14,960 --> 00:42:17,080
Speaker 1: Thank you for having me. It's being fun. Thank you, Tim,

768
00:42:17,160 --> 00:42:19,840
Speaker 1: and thank you for the pineapple cakes. I love talking

769
00:42:19,880 --> 00:42:24,520
Speaker 1: about semiconductors while eating the real reason we had Tim ufen. No,

770
00:42:24,680 --> 00:42:39,799
Speaker 1: that was great. Thank you so much, Tracy. I really

771
00:42:39,960 --> 00:42:43,279
Speaker 1: thought that was interesting. I didn't realize the history of

772
00:42:43,520 --> 00:42:46,400
Speaker 1: fox Con. I mean I just basically sort of only

773
00:42:46,680 --> 00:42:48,759
Speaker 1: missed him said more or less ever heard of the

774
00:42:48,840 --> 00:42:52,840
Speaker 1: company around when the sort of you know, when the

775
00:42:52,920 --> 00:42:57,520
Speaker 1: sort of infamy of their iPhone production was in the news.

776
00:42:57,800 --> 00:43:00,360
Speaker 1: But it's interesting that the sort of like real origin

777
00:43:00,520 --> 00:43:03,440
Speaker 1: heyday was in the nineties. I had no idea that

778
00:43:03,560 --> 00:43:06,719
Speaker 1: like those were like super boom times, right, because everyone thinks, oh,

779
00:43:06,719 --> 00:43:09,320
Speaker 1: assembling iPhones, you probably make loads of money off of that,

780
00:43:09,520 --> 00:43:12,640
Speaker 1: but actually it's building the sort of modular components for

781
00:43:12,880 --> 00:43:17,680
Speaker 1: I didn't realize that these those modules. Yeah. The other

782
00:43:17,800 --> 00:43:20,560
Speaker 1: thing that stuck out for me from that conversation was

783
00:43:20,680 --> 00:43:23,880
Speaker 1: just the idea of a company like fox Con becoming

784
00:43:24,000 --> 00:43:27,239
Speaker 1: more of a force in the e V space by

785
00:43:27,440 --> 00:43:32,440
Speaker 1: virtue of building those components and in some respects demanding standardization.

786
00:43:33,080 --> 00:43:35,680
Speaker 1: And I wish I could remember who exactly said this,

787
00:43:35,920 --> 00:43:38,200
Speaker 1: but you know, there was a school of thought that

788
00:43:38,920 --> 00:43:42,640
Speaker 1: in the future, insurers we're going to be these massive

789
00:43:42,760 --> 00:43:45,839
Speaker 1: influencers on society and the economy because they're the ones

790
00:43:45,920 --> 00:43:50,280
Speaker 1: that are ultimately pricing um and sort of dealing in risks.

791
00:43:50,360 --> 00:43:53,960
Speaker 1: So they were the ones setting safety standards, and I

792
00:43:54,160 --> 00:43:57,080
Speaker 1: kind of I think about that with relation to something

793
00:43:57,200 --> 00:43:59,919
Speaker 1: like Fox con if they're the ones building the compon

794
00:44:00,000 --> 00:44:03,279
Speaker 1: oponents and setting the standards for some of the things

795
00:44:03,360 --> 00:44:05,839
Speaker 1: going into e v s, and you know, to Tim's point,

796
00:44:05,880 --> 00:44:08,440
Speaker 1: obviously they have to comply with government standards as well,

797
00:44:08,600 --> 00:44:11,120
Speaker 1: but there are other things that can influence. It feels

798
00:44:11,120 --> 00:44:15,399
Speaker 1: like they just become a really big force in the space. Absolutely,

799
00:44:15,680 --> 00:44:21,239
Speaker 1: it feels like the existing automakers obviously Tesla, but Tesla side,

800
00:44:21,280 --> 00:44:23,920
Speaker 1: but it seems like the existing automakers definitely do not

801
00:44:24,200 --> 00:44:28,080
Speaker 1: want to become Dell and Hewlett Packard and Comback and

802
00:44:28,239 --> 00:44:32,200
Speaker 1: Zero's and Tandy in Gateway and just be like pure

803
00:44:32,520 --> 00:44:35,920
Speaker 1: boxes on a bunch of components that are all identical

804
00:44:36,320 --> 00:44:40,359
Speaker 1: in no margin. But on the other hand, like you know, car,

805
00:44:41,080 --> 00:44:43,399
Speaker 1: I don't know car. You know, it's like cars all

806
00:44:43,520 --> 00:44:45,720
Speaker 1: kind of looked the same, but of course car people

807
00:44:45,800 --> 00:44:50,480
Speaker 1: would what but they were like wildly different, a bunch

808
00:44:50,520 --> 00:44:54,000
Speaker 1: of angry emails. There's a lot of similarities between cars,

809
00:44:54,120 --> 00:44:56,040
Speaker 1: especially these days, they'll kind of look the same. Well,

810
00:44:56,080 --> 00:44:58,480
Speaker 1: I mean, it does feel like there is this massive

811
00:44:58,560 --> 00:45:03,560
Speaker 1: tension between fox Con and it's potential customers in the

812
00:45:03,640 --> 00:45:07,120
Speaker 1: form of EV manufacturers, and it's you know, it's not

813
00:45:07,320 --> 00:45:11,279
Speaker 1: again dissimilar to maybe the relationship between Apple and fox Con,

814
00:45:11,600 --> 00:45:13,440
Speaker 1: but it's going to be really interesting to see how

815
00:45:13,520 --> 00:45:15,239
Speaker 1: it shakes out. And it does feel like a bit

816
00:45:15,280 --> 00:45:19,000
Speaker 1: of a power struggle potentially. Yeah, and either way, it

817
00:45:19,160 --> 00:45:22,800
Speaker 1: is going to be different than PCs or the iPhone

818
00:45:23,000 --> 00:45:25,840
Speaker 1: because of this. There's also it's almost certainly going to

819
00:45:25,920 --> 00:45:30,560
Speaker 1: be the US car market is served by US manufacturing,

820
00:45:31,400 --> 00:45:34,120
Speaker 1: whether it's a fox Con factory, whether it's a Rivian factory,

821
00:45:34,120 --> 00:45:36,520
Speaker 1: whether it's a GM factory. It's going to be domestic.

822
00:45:36,600 --> 00:45:38,680
Speaker 1: So it's not going to be this sort of like

823
00:45:39,360 --> 00:45:41,320
Speaker 1: let's build a bunch of cheap stuff in Asia for

824
00:45:41,400 --> 00:45:44,799
Speaker 1: shipping over there's probably some component shipping, but it will

825
00:45:44,840 --> 00:45:47,960
Speaker 1: still be something of a new model that's different than

826
00:45:48,000 --> 00:45:51,080
Speaker 1: fox Cons path past. It seems like it all right,

827
00:45:51,120 --> 00:45:53,160
Speaker 1: shall we leave it there? Let's leave it there? All right?

828
00:45:53,280 --> 00:45:56,120
Speaker 1: This has been another episode of the All Thoughts podcast.

829
00:45:56,239 --> 00:45:58,600
Speaker 1: I'm Tracy Alloway. You can follow me on Twitter at

830
00:45:58,640 --> 00:46:01,160
Speaker 1: Tracy Alloway, and I'm Joe. Why isn't thal you could

831
00:46:01,200 --> 00:46:04,359
Speaker 1: follow me on Twitter at The Stalwart, and follow our

832
00:46:04,440 --> 00:46:08,520
Speaker 1: guest Tim Colpen on Twitter. He's at t Colpen. Follow

833
00:46:08,600 --> 00:46:12,440
Speaker 1: our producer Carmen Rodriguez at Carmen Arman. Follow the Bloomberg

834
00:46:12,520 --> 00:46:16,560
Speaker 1: head of podcast, Francesca Levie at Francesca Today, and check

835
00:46:16,600 --> 00:46:19,320
Speaker 1: out all of our podcasts at Bloomberg under the handle

836
00:46:19,680 --> 00:46:21,440
Speaker 1: at podcasts. Thanks for listening.