WEBVTT - Foxconn Has a Plan to Upend the Electric Vehicle Industry 0:00:10.480 --> 0:00:14.480 Hello, and welcome to another episode of the Odd Lots Podcast. 0:00:14.560 --> 0:00:17.960 I'm Joe Wisenthal and I'm Tracy Halloway. Tracy, you know 0:00:17.960 --> 0:00:21.560 what I was thinking, Like, there's so much attention to 0:00:21.800 --> 0:00:26.079 Elon Musk and all of his controversies and the things 0:00:26.120 --> 0:00:28.440 that he does in his personal life and Twitter and 0:00:28.440 --> 0:00:31.000 potentially buying Twitter and the tweets and everything. I think 0:00:31.040 --> 0:00:35.400 sometimes people forget like what an extraordinary success or what 0:00:35.479 --> 0:00:38.760 an extraordinary company, just like Tesla has been over the 0:00:38.840 --> 0:00:46.120 last decade. Oh boy, where to start? Well, first of all, um, 0:00:46.159 --> 0:00:49.360 a cynic might say that Elon Musk courts that kind 0:00:49.360 --> 0:00:53.040 of controversy quite actively and that maybe if he wanted 0:00:53.080 --> 0:00:57.240 the focus to be on what Tesla was doing, um, 0:00:57.320 --> 0:01:01.280 he could go about it a different way. But anyway, Yeah, Tesla, Tesla, 0:01:01.400 --> 0:01:04.240 I mean, just looking at the share price, it's down 0:01:04.360 --> 0:01:09.240 obviously from its peak, but over its history it's you know, 0:01:09.720 --> 0:01:14.039 a very successful company from a purely financial basis or 0:01:14.240 --> 0:01:16.600 just looking at the share price. Yeah, And you know, 0:01:16.680 --> 0:01:19.920 like when I think about the last decade, obviously it 0:01:20.040 --> 0:01:25.800 was about the rise of software. Software is eating the world, Uh, cryptocurrency, 0:01:26.280 --> 0:01:29.000 all these sort of things that just like existing code. 0:01:29.440 --> 0:01:32.840 And here's a company that became the biggest car company 0:01:32.840 --> 0:01:36.160 in the world at least by market cap, by actually 0:01:36.800 --> 0:01:40.039 manufacturing something that is actually built. And so this was 0:01:40.120 --> 0:01:43.240 a decade in which people weren't really into manufacturing and 0:01:43.319 --> 0:01:48.000 really weren't into capital intensive businesses. And yet during that decade, 0:01:48.880 --> 0:01:52.520 this one company is sort of like just extraordinarily well 0:01:52.560 --> 0:01:55.200 at a time when that wasn't really that cool. Right, Okay, 0:01:55.240 --> 0:01:58.000 so this is possibly one of the few things that 0:01:58.120 --> 0:02:01.280 you cannot fault elon must for it. But he certainly 0:02:01.440 --> 0:02:05.040 likes to make things right. And you can debate whether 0:02:05.120 --> 0:02:08.560 or not those things are realistic, but everything from electric 0:02:08.600 --> 0:02:14.440 cars to flame throwers to you know, tunnels underground satellite 0:02:14.560 --> 0:02:19.359 launching equipment that starlink. Yeah. Um, he makes things at 0:02:19.360 --> 0:02:22.600 a time when the emphasis wasn't really on making things. 0:02:22.680 --> 0:02:25.320 It was on software, as you mentioned, and sort of 0:02:25.320 --> 0:02:30.079 the ephemeral stuff, big ideas and changing the world through 0:02:30.120 --> 0:02:34.520 technology but not necessarily tangible technology. Right, And of course 0:02:34.600 --> 0:02:37.400 one of our themes, and it's something that we hit 0:02:37.440 --> 0:02:39.840 on with a lot of our Commodities episodes and you know, 0:02:39.880 --> 0:02:42.840 some of our conversations with Jeff Curry and all kinds 0:02:42.840 --> 0:02:44.560 of things that we've been doing over the last year 0:02:44.800 --> 0:02:47.920 has been about this sort of the revenge of the real, 0:02:48.320 --> 0:02:52.639 the tangible economy actually putting stuff together. It's really hard, 0:02:52.960 --> 0:02:55.760 but it's sort of it feels like this sort of 0:02:55.800 --> 0:02:58.000 like physical engineering is going to be one of the 0:02:58.080 --> 0:03:02.320 huge themes of this next decade. Yeah, I think that's right. 0:03:02.360 --> 0:03:05.639 And again I think maybe we're so used to thinking 0:03:05.639 --> 0:03:10.799 about technology as like a search engine or a software company, 0:03:10.840 --> 0:03:14.760 but it feels like that might be starting to change. 0:03:14.760 --> 0:03:17.320 And nowadays when people think about technology, when they think 0:03:17.320 --> 0:03:21.200 about technological prowess, it feels like a lot of people 0:03:21.360 --> 0:03:25.920 think about things like semiconductors and chips and the actual 0:03:26.080 --> 0:03:30.760 physical components that drive that kind of technological innovation. Yeah. 0:03:30.800 --> 0:03:35.000 And so when you think about like manufacturing tech, right, like, okay, 0:03:35.160 --> 0:03:37.480 we're talking about who's may have acturing, you might think 0:03:37.480 --> 0:03:40.800 of Taiwan Semiconductor, which of course we've done episodes Intel, 0:03:41.200 --> 0:03:44.040 And then another name that has to come up in 0:03:44.080 --> 0:03:47.480 all of that has to be fox Con, which everybody 0:03:47.520 --> 0:03:50.720 knows is basically the company that makes the iPhones, the 0:03:50.760 --> 0:03:56.280 company that is sim Yeah, that's right. So I think again, 0:03:56.720 --> 0:03:58.440 this is sort of one of the big themes that 0:03:58.480 --> 0:04:00.320 has come out of the past couple of years in 0:04:00.320 --> 0:04:03.640 the global pandemic, but also even the trade war before that. 0:04:04.080 --> 0:04:08.400 But we all are intensely aware now of how these 0:04:08.480 --> 0:04:12.320 tech supply chains actually work and where things are made 0:04:12.360 --> 0:04:14.920 and who is putting them together. Yeah, and so did 0:04:14.960 --> 0:04:18.200 you know, Well, I didn't know that until recently. Did 0:04:18.200 --> 0:04:23.040 you know that fox Con itself wants to get into, uh, 0:04:23.080 --> 0:04:27.599 the electric vehicle game? I didn't know that either. I 0:04:27.760 --> 0:04:31.560 know that the head of fox Con, Terry Coo, I 0:04:31.720 --> 0:04:36.160 know he's he's a he's an ambitious guy, he has plans, 0:04:36.800 --> 0:04:40.120 But I didn't know about this specific space. So yeah, 0:04:40.200 --> 0:04:42.200 I'm interested in learning more about it. Yeah, and I 0:04:42.200 --> 0:04:44.800 think you're sort of like, it's hard to understand the 0:04:44.839 --> 0:04:48.000 world over the last several decades without understanding the trajectory 0:04:48.000 --> 0:04:50.400 of fox Con and so the fact that they want 0:04:50.520 --> 0:04:52.880 to be a player and ev is really interesting. So 0:04:52.920 --> 0:04:54.560 I think we should talk about it. Let's do it, 0:04:54.640 --> 0:04:57.320 all right. I'm very excited because in studio with us, 0:04:57.520 --> 0:04:59.520 this is a real treat. In studio with us, we 0:04:59.560 --> 0:05:03.760 have a colpen. He has a Bloomberg opinion columnist normally 0:05:03.920 --> 0:05:06.640 based in Taipei. But he is here in studio with us, 0:05:07.000 --> 0:05:08.839 and he is going to talk He knows all about 0:05:08.839 --> 0:05:10.719 Fox count. We'd actually I think we had him on 0:05:10.800 --> 0:05:13.239 last year to talk about Taiwan semi, so he knows 0:05:13.279 --> 0:05:18.040 about the world of manufacturing, the real economy that most 0:05:18.040 --> 0:05:20.480 people forgot over the last decade. Knows a lot about it. 0:05:20.560 --> 0:05:23.359 Plus he brought us pineapple cakes, so you know, he 0:05:23.400 --> 0:05:26.640 automatically gets an episode thanks to thanks for the pineapple cakes. 0:05:26.680 --> 0:05:29.560 To no worries, I apparently listeners. If you do want 0:05:29.600 --> 0:05:32.040 to get onto the Odds podcasts, you just have described 0:05:32.560 --> 0:05:37.880 Tracy and Joe with with goodies, and Tracy really likes sweets. Okay, 0:05:37.400 --> 0:05:40.200 I don't know Tracy's opinion on Elon Musk, but I 0:05:40.279 --> 0:05:42.600 know that Tracy likes sweet So yes, if you want 0:05:42.640 --> 0:05:45.720 to get on odd Loads, send Tracy a pineapple cake 0:05:46.160 --> 0:05:48.680 or some other pastry and you will probably get invited. 0:05:48.760 --> 0:05:52.360 It's really that easy. Uh, Tim, Great to have you, 0:05:53.040 --> 0:05:57.920 Great to have you here. What is Fox con Oh, 0:05:57.960 --> 0:05:59.760 I didn't expect you to give me such an opening 0:05:59.839 --> 0:06:03.240 and the question. All right, So so our producer Carmen 0:06:03.320 --> 0:06:04.800 is going to have to cut this after about three 0:06:04.839 --> 0:06:07.960 hours when you give me that question, what's interesting, I'm 0:06:07.960 --> 0:06:10.640 going to go back in time in history, if you'll 0:06:10.680 --> 0:06:14.039 indulge me. I think everyone first started to learn about 0:06:14.080 --> 0:06:19.160 fox Con. That was when the the unfortunate suicides happened 0:06:19.440 --> 0:06:22.719 and the company became famous because of it. And there's 0:06:22.720 --> 0:06:26.839 about a dozen suicides that year. Uh and even fox 0:06:26.920 --> 0:06:30.160 Con chairman and founder Terry Ware at first there was 0:06:30.160 --> 0:06:32.440 a couple of suicides, and he admitted to to us 0:06:32.480 --> 0:06:35.240 when we interviewed him at that time, I didn't think 0:06:35.320 --> 0:06:38.240 it was a big deal. And to put it in 0:06:38.240 --> 0:06:40.880 in in context, at the time, they had about a 0:06:40.920 --> 0:06:44.479 million employees. So if you go to any town in 0:06:44.520 --> 0:06:47.000 America and China and anywhere in the world, you know, 0:06:47.200 --> 0:06:49.719 with the million employees, it's unfortunately you're going to have, 0:06:49.880 --> 0:06:52.800 you know, a couple of suicides. It's just an unfortunate reality. 0:06:52.920 --> 0:06:55.039 So he didn't think it was a big deal. But 0:06:55.080 --> 0:06:57.760 after about the fifth he's like, oh, we've really got 0:06:57.800 --> 0:07:00.520 an issue here. And of course it got a lot 0:07:00.560 --> 0:07:04.880 of global attention from from everybody, including US Bloomberg and 0:07:04.920 --> 0:07:09.040 Bloomberg Business Week. But that's really what put fox Con 0:07:09.040 --> 0:07:12.200 on the radar. But they've been going since the mid seventies, 0:07:12.400 --> 0:07:15.880 Terry Gore, who was born in Taiwan, was one of 0:07:15.880 --> 0:07:18.960 the first people to embrace shen Jin in China across 0:07:18.960 --> 0:07:21.840 the other side of the Taiwan straight He went there 0:07:21.960 --> 0:07:24.480 at the time when China had decided that shen Jen 0:07:24.560 --> 0:07:28.280 would be this special economic zone and China was just 0:07:28.320 --> 0:07:31.240 starting to open up to the world, and Terry Guare 0:07:31.440 --> 0:07:35.040 was very quick to embrace it. He saw a real potential. Obviously, 0:07:35.960 --> 0:07:38.240 cheap labor was was a real draw card, but he 0:07:38.280 --> 0:07:42.640 saw a potential for a very large labor pool and 0:07:42.720 --> 0:07:44.880 also the fact that there could be a supply chain 0:07:45.040 --> 0:07:47.040 building there. So he was one of the first people 0:07:47.080 --> 0:07:49.080 to say, you know what this this is the place 0:07:49.120 --> 0:07:51.800 to be. And so he went and set up shop there. 0:07:52.320 --> 0:07:55.160 And one of the kind of the craziest ways or 0:07:55.280 --> 0:07:57.760 simplest ways that he could get higher he could hire 0:07:57.800 --> 0:08:01.520 employees because there was a lot of competition for for 0:08:01.600 --> 0:08:04.560 labor at the time, was that he decided to just 0:08:04.600 --> 0:08:08.880 treat them a little bit better than other employers in China. Now, 0:08:08.960 --> 0:08:11.040 people look at the Fox con scan and say, you know, 0:08:11.080 --> 0:08:14.280 they're a sweatshop and they're terrible on staff, and you know, 0:08:14.360 --> 0:08:18.400 treat labor badly. Actually in context, um, and I sound 0:08:18.480 --> 0:08:21.200 like a bit of a Fox con apologist here, but 0:08:21.280 --> 0:08:24.480 in context, they did actually treat their employees in the 0:08:24.480 --> 0:08:26.960 early days and right through their history actually a lot 0:08:27.000 --> 0:08:30.480 better than than a lot of employees employers do in China. 0:08:30.880 --> 0:08:32.719 And so one of the first things Terry Gore did 0:08:32.800 --> 0:08:34.680 was he said, Okay, I want all of my my 0:08:34.760 --> 0:08:38.040 workers to eat well, So every single one of them 0:08:38.040 --> 0:08:39.839 would get an egg a day so they could get 0:08:39.840 --> 0:08:41.280 a bit of protein. That was kind of a bit 0:08:41.280 --> 0:08:43.920 of a way out idea at the time. This was 0:08:44.080 --> 0:08:46.360 just to be clear, this was in the eies, seventies, 0:08:46.360 --> 0:08:52.360 and and so Terry War is not an electronics guy. 0:08:52.679 --> 0:08:55.880 Most people in the tech industry have a tech background. 0:08:55.920 --> 0:08:59.960 They have an electronics background, um, maybe electronic engineering. Terry 0:09:00.000 --> 0:09:04.240 War studied a maritime college in northern Taiwan, so he 0:09:04.320 --> 0:09:08.120 really started shipping and logistics, and then he moved into plastics. 0:09:08.400 --> 0:09:12.840 So he's he's kind of opening business was plastic injection molding. 0:09:13.400 --> 0:09:15.600 And if you think of Taiwan in the seventies and eighties, 0:09:15.640 --> 0:09:17.800 it was known as you know, made in Taiwan, cheap 0:09:17.840 --> 0:09:21.000 plastic toys, Barbie dolls, and everything else was made in Taiwan, 0:09:21.040 --> 0:09:24.320 so that was his business. He was a plastics guy. 0:09:24.520 --> 0:09:26.960 One of his first things was to make the little 0:09:27.000 --> 0:09:29.559 plastic tuner knobs on our c A t v s. 0:09:30.240 --> 0:09:33.199 And over time he went more and more into plastics 0:09:33.480 --> 0:09:36.200 and uh and when the electronics boom happened from you know, 0:09:36.240 --> 0:09:40.040 the eighties, he he started getting into the business and 0:09:40.160 --> 0:09:43.320 making the connectors that would connect to say, your printer 0:09:43.440 --> 0:09:47.840 to your PC, or your atari to the television. And 0:09:47.920 --> 0:09:50.280 if you remember, you know, those of us of age 0:09:50.360 --> 0:09:53.960 can remember, they are flat cables with two thirty six pins. 0:09:54.240 --> 0:09:56.679 They were kind of difficult to make, and so if 0:09:56.720 --> 0:10:00.240 you could work out ways to make these connectors, you 0:10:00.280 --> 0:10:04.160 could get pretty fat margins. And so the name fox Con. 0:10:04.280 --> 0:10:07.000 The con in fox Con is connector. That's that's where 0:10:07.000 --> 0:10:10.280 the name comes from. And as an interesting aside, his 0:10:10.480 --> 0:10:14.040 brother runs a company called fox Link, which does the 0:10:14.120 --> 0:10:18.440 cable part, the boring cable that goes between the two connectors. Now, 0:10:18.480 --> 0:10:21.040 of course that's not as exciting anymore because pretty much 0:10:21.040 --> 0:10:23.880 everybody's on USB and FireWire and everything else. But back 0:10:23.920 --> 0:10:27.480 then there was like sixty different types of connectors, and 0:10:27.480 --> 0:10:32.160 and since then they have basically been a component company, 0:10:32.360 --> 0:10:34.600 and so we think of them as being a company 0:10:34.640 --> 0:10:37.600 that hires a million workers, you know, at peak time 0:10:37.679 --> 0:10:40.839 to to assemble iPhones. But if you look at the 0:10:40.960 --> 0:10:44.280 numbers um you know, back in the mid nineties when 0:10:44.320 --> 0:10:47.000 the PC boom was happening and people like Michael Dell 0:10:47.080 --> 0:10:49.480 and others decided that they want to be into the 0:10:49.600 --> 0:10:54.120 in the PC business, fox Con got into the business 0:10:54.120 --> 0:10:57.720 of just creating the components. They weren't really assembling that much. 0:10:57.760 --> 0:10:59.840 They were doing the components that went inside. And if 0:10:59.880 --> 0:11:02.400 you ever opened up a desktop PC, you'll see the 0:11:02.440 --> 0:11:06.160 motherboard inside and there's just all sorts of componentry welded 0:11:06.200 --> 0:11:09.320 to the motherboard. That's the business that fox Con was in, 0:11:09.440 --> 0:11:12.240 and that's to this day kind of the business they're 0:11:12.240 --> 0:11:14.640 in right now. We just don't really think of it 0:11:14.720 --> 0:11:18.199 because it's not a sexy But I'll tell you one thing, guys, 0:11:18.280 --> 0:11:24.200 the margins are really, really, really good. So their gross 0:11:24.240 --> 0:11:27.840 margins were over thirty and if if anyone really kind 0:11:27.840 --> 0:11:30.760 of dives into, you know, the margins business, I knew 0:11:30.760 --> 0:11:33.959 you've had. Stacy has gone on co cover Semis is 0:11:34.000 --> 0:11:37.520 a really nice gross margin and at the time Apple 0:11:37.559 --> 0:11:40.920 which was kind of at its worst period. INTI was 0:11:41.000 --> 0:11:45.400 doing ten percent gross margins, so they did very very well. 0:11:45.520 --> 0:11:49.160 Now in context, margins at fox Con dropped off over 0:11:49.200 --> 0:11:52.600 the next decade as they went more and more into assembly, 0:11:52.640 --> 0:11:55.280 which is not a margin business. I was going to ask, 0:11:55.320 --> 0:11:58.360 can you talk a little bit more about the difference 0:11:58.440 --> 0:12:03.800 between making components versus assembly and why what fox Con 0:12:04.000 --> 0:12:07.440 is doing, you know, was was somewhat unusual at the time, 0:12:07.520 --> 0:12:10.240 is my understanding? Yeah, no, that's I think that's a 0:12:10.240 --> 0:12:13.720 good question. So components, um, I mean, the most high 0:12:13.760 --> 0:12:16.600 level components are chips, right um time and semiconductor we 0:12:16.640 --> 0:12:18.800 talked about before, and that's that's the sexy part of 0:12:18.840 --> 0:12:23.920 the industry. But going down the supply chain, you get 0:12:23.960 --> 0:12:25.760 these chips and you put them onto a module, you 0:12:25.880 --> 0:12:28.680 well them together. There's other there's so many chips inside 0:12:28.679 --> 0:12:30.960 a computer or inside an iPhone that are kind of boring, 0:12:31.040 --> 0:12:35.360 you know, capacitors and and things that control the voltage 0:12:35.400 --> 0:12:38.959 withinside a computing system. Now, the thing about these is 0:12:39.000 --> 0:12:41.280 they self they sell for a dollar or two. They 0:12:41.280 --> 0:12:43.240 don't sell for a lot of money, but they're huge, 0:12:43.320 --> 0:12:47.600 huge volume, and because they're very very very specialized, um, 0:12:47.640 --> 0:12:50.600 it's not easy to swap out one component from another. 0:12:51.120 --> 0:12:53.679 So if you're a company like fox Con as they 0:12:53.720 --> 0:12:56.120 were in the nineties, and you work out exactly how 0:12:56.120 --> 0:12:58.520 to do exactly the right component with all the right 0:12:58.600 --> 0:13:02.000 specs and your client, it's all the PC makers electronics 0:13:02.000 --> 0:13:04.880 makers go, that's just the component I need. It's only 0:13:04.920 --> 0:13:07.360 a dollar, but I need it, and it's got to work. 0:13:07.360 --> 0:13:09.880 It can't you can't mess up. They will put in 0:13:09.960 --> 0:13:12.160 orders for millions of them. They buy them by the bucket. 0:13:12.800 --> 0:13:14.520 And if you're someone like Foxcon who can do that 0:13:14.600 --> 0:13:17.280 really well and set up a production system that makes 0:13:17.320 --> 0:13:20.480 them really well, you've got fat margins. So it's it's 0:13:20.679 --> 0:13:23.880 very high volume but low price. Like the price point 0:13:23.920 --> 0:13:26.000 is very low, but with fat margins, you can be 0:13:26.040 --> 0:13:28.720 a very very profitable company and you've almost got the 0:13:28.760 --> 0:13:30.880 market to yourself in some of these components, because the 0:13:30.880 --> 0:13:34.280 barriers to entry are quite high. And that's really the 0:13:34.280 --> 0:13:36.679 bread and butter of Foxcon. Even to this day, they 0:13:36.720 --> 0:13:38.840 make a lot of money from an iPhone from the 0:13:38.920 --> 0:13:43.000 components that go inside an iPhone rather than actually assembling 0:13:43.040 --> 0:13:49.000 an iPhone. How did Apple find fox came well? When 0:13:49.720 --> 0:13:52.760 Steve Jobs came back. Um, as we all know, the 0:13:52.800 --> 0:13:55.960 company was in trouble. They Apple was actually making their computers, 0:13:55.960 --> 0:13:59.319 like physically making them in California. But over the over 0:13:59.360 --> 0:14:02.760 a period of time, many companies, um, you know, Michael 0:14:02.840 --> 0:14:05.920 Dell and Heller, Packard, Compact and others were starting to 0:14:05.960 --> 0:14:09.360 outsource to Asia. And at some point during that period 0:14:09.400 --> 0:14:12.959 of time, Tim Cork who was who was operating officer 0:14:13.000 --> 0:14:15.440 at the time, he had not yet become CEO, would 0:14:15.440 --> 0:14:18.320 have discovered fox con and realized that, you know, these 0:14:18.400 --> 0:14:20.680 these guys make the components, we should probably get to 0:14:20.720 --> 0:14:23.760 know them. And they really jumped into bed deeply when 0:14:23.920 --> 0:14:26.360 the iPod came out in the early two thousand's and 0:14:26.360 --> 0:14:28.600 that was one of the really the first high high 0:14:28.720 --> 0:14:33.000 high volume electronics product after maybe um you know, the 0:14:33.080 --> 0:14:37.160 Sony Walkman, and no one else really had the kind 0:14:37.160 --> 0:14:40.000 of scale in n Jen to do it. So it 0:14:40.080 --> 0:14:42.360 was really started with the iPod era and it was 0:14:42.400 --> 0:14:45.320 only the iPhone that came almost a decade later, or 0:14:45.400 --> 0:14:48.600 less than a decade later. And when you know, Tim 0:14:48.640 --> 0:14:52.160 Cook needed someone to assemble this new gadget that nobody 0:14:52.200 --> 0:14:55.000 had ever heard of but heard rumors of Fox and 0:14:55.200 --> 0:14:58.240 was the place to go well on this question of 0:14:58.280 --> 0:15:02.160 like assembly. So you know, I'm sort of thinking about 0:15:02.240 --> 0:15:08.160 like actually our Taiwan Semi conversation, and you know Taiwan Semi. 0:15:08.320 --> 0:15:10.880 You know, just like over time like builds up an 0:15:10.920 --> 0:15:15.600 expertise to be able to manufacture chips at scale while 0:15:15.640 --> 0:15:18.560 making very few errors, and they just become really good 0:15:18.600 --> 0:15:21.520 at it. What is like, is it similar with fox 0:15:21.600 --> 0:15:24.080 con where just over time they just sort of build 0:15:24.160 --> 0:15:27.520 up this internal muscle or you know, you can come 0:15:27.600 --> 0:15:31.200 up with a new design. Here's the design of an iPhone, 0:15:31.400 --> 0:15:34.840 or sorry, here's the design of an iPod, And because 0:15:34.880 --> 0:15:37.520 they've just like built up this sort of like internal 0:15:37.560 --> 0:15:40.280 tacit knowledge of how to assemble things, It's just no 0:15:40.320 --> 0:15:43.480 one else can really do something like that at scale 0:15:43.520 --> 0:15:46.680 and have to be consistently good precisely. That's really really it. 0:15:46.680 --> 0:15:49.320 It's it's not that difficult to make one pizza. Try 0:15:49.320 --> 0:15:51.440 and make fifty pizzas and now or you know, a 0:15:51.480 --> 0:15:55.160 thousand pizzas, and now that's difficult because quality yield, right, 0:15:55.200 --> 0:15:57.480 the amount of products that you put through the production 0:15:57.520 --> 0:16:00.360 line that are usable at the end, that is very 0:16:00.440 --> 0:16:02.880 very difficult. Scale is really what it's all about in 0:16:03.040 --> 0:16:06.400 pretty much any industry, even in cars. You know, Tesla's 0:16:06.720 --> 0:16:10.360 struggles over the years have been about scaling, and so, yeah, 0:16:10.360 --> 0:16:13.560 you're right. They had built up this this knowledge base 0:16:13.680 --> 0:16:16.240 from making components so that when it came to things 0:16:16.280 --> 0:16:18.560 that were a bit more labor intensive, and they had 0:16:18.640 --> 0:16:21.720 used a lot of labor even for their components, this 0:16:21.840 --> 0:16:23.920 was the company that you would turn to. And you know, 0:16:24.200 --> 0:16:26.960 what is it a dozen years after the first iPhone 0:16:27.000 --> 0:16:30.960 came out, seventy iPhones are still made by Foxcon. Right, 0:16:31.200 --> 0:16:34.520 the Apple can't replace them. They're addicted to fox Con. 0:16:34.640 --> 0:16:36.960 I was going to ask what is the relationship like 0:16:37.200 --> 0:16:39.600 between those two entities, because on the one hand, okay, 0:16:39.600 --> 0:16:43.040 fox Con providing a valuable service for Apple, clearly, but 0:16:43.480 --> 0:16:48.040 it feels like Apple is basically reliant on one supplier here. Yeah, 0:16:48.120 --> 0:16:51.440 I mean, it's it's it's a possibly an unhealthy I've 0:16:51.520 --> 0:16:55.800 argued for a long time, it's a very unhealthy codependence. Um, 0:16:55.840 --> 0:16:57.560 you know, there is really if you look at the 0:16:57.560 --> 0:17:01.800 tech industry globally or of the world in general. Um, 0:17:01.840 --> 0:17:04.920 you know, if if Apple was to disappear overnight, um, 0:17:04.960 --> 0:17:06.800 you know, we wouldn't get our ophines, and you know, 0:17:06.840 --> 0:17:09.440 maybe that wouldn't be a very nice thing, or Facebook 0:17:09.480 --> 0:17:12.920 disappeared that would be terrible, or some people might argue 0:17:12.960 --> 0:17:16.200 the opposite. But if if fox Con or t SMC 0:17:16.480 --> 0:17:18.720 were to disappear from the face of the earth overnight, 0:17:19.119 --> 0:17:22.320 we've been a lot of trouble because nobody can do 0:17:22.359 --> 0:17:25.800 what these two companies can do, and they even if 0:17:25.840 --> 0:17:28.560 they tried, and so many companies have been trying to 0:17:28.600 --> 0:17:32.240 replace fox Con. Apple doesn't want to be addicted to 0:17:32.240 --> 0:17:34.440 fox Con, right, It's just not healthy. It's not about 0:17:34.480 --> 0:17:36.240 them being a good or a bad company. It's just 0:17:36.280 --> 0:17:39.800 not healthy to have one supplier. So over the years, 0:17:40.080 --> 0:17:44.439 Apple has diversified away, ironically to mostly Taimeanese companies like 0:17:44.480 --> 0:17:48.120 with Troyn and Pegatron, and some Chinese companies too, uh. 0:17:48.160 --> 0:17:50.679 And of course they have diversified away from China to 0:17:50.720 --> 0:17:53.679 an extent in India and Brazil and other places. But 0:17:53.880 --> 0:17:58.160 really they can't help it. And fox Con is also 0:17:58.400 --> 0:18:02.800 unhealthily addicted to a fifty percent of their revenue comes 0:18:02.800 --> 0:18:05.280 from Apple, uh, and it's been that way for more 0:18:05.280 --> 0:18:07.520 than a decade. They brought in about two hundred and 0:18:07.720 --> 0:18:10.600 fifteen billion dollars of revenue last year fox Con and 0:18:10.680 --> 0:18:14.159 half of that came from Apple, So they can't do 0:18:14.320 --> 0:18:29.840 that Apple unless they get into the EV business. The 0:18:29.880 --> 0:18:32.399 hottest gadget or one of the hottest gadgets in the 0:18:32.400 --> 0:18:37.320 world right now is the electric vehicle, and Tesla is 0:18:37.400 --> 0:18:41.720 the leader. But we know that every uh, every car company, 0:18:42.359 --> 0:18:44.440 um wants to get into e v s and they're 0:18:44.440 --> 0:18:46.639 spending a lot of money and actually rolling out cars 0:18:46.640 --> 0:18:49.879 and some of them seem to be decent. Before we 0:18:49.920 --> 0:18:54.399 get into fox CON's ambitions in the space, how is 0:18:54.760 --> 0:19:00.440 manufacturing a car historically different than manufacturing electron I mean, 0:19:00.440 --> 0:19:02.800 my guess is, like GM and Ford at all, they 0:19:02.840 --> 0:19:05.399 have their own plants, they're in the United States. They 0:19:05.400 --> 0:19:07.720 don't just like make a design and send it to 0:19:07.760 --> 0:19:10.560 some other company to build. They actually build it themselves. 0:19:10.560 --> 0:19:13.000 But how would you compare and contrast the sort of 0:19:13.040 --> 0:19:17.480 like existing legacy approach to building a car versus the 0:19:17.520 --> 0:19:20.159 existing approach to building a phone. Well, at the end 0:19:20.160 --> 0:19:22.200 of the day, yeah, no, I think it's a fair 0:19:22.240 --> 0:19:24.840 point at the end of the day. I mean, car 0:19:24.880 --> 0:19:26.959 companies don't want to admit it, but all cars are 0:19:27.040 --> 0:19:30.119 kind of similar, right um now, where there is a 0:19:30.200 --> 0:19:33.960 differences in engines. Right, So companies like Toyota and Ford 0:19:34.080 --> 0:19:36.760 and the Europeans as well, have have worked a lot 0:19:36.840 --> 0:19:40.280 on on engine design and and car buffs will say, well, 0:19:40.320 --> 0:19:43.600 this engine, this you know V six or this straightforward 0:19:43.680 --> 0:19:46.200 whatever is is a better engine. And a new car 0:19:46.320 --> 0:19:48.280 comes out with a new engine and people love it 0:19:48.359 --> 0:19:50.720 or hate it. But the other part, that kind of 0:19:50.720 --> 0:19:53.960 the the I P is in how you make it. 0:19:54.000 --> 0:19:56.320 And Toyota, i guess, is most famous for their production 0:19:56.400 --> 0:19:58.880 system that just in time and all of that um 0:19:58.920 --> 0:20:00.800 and again it comes back to the issue of scale 0:20:00.880 --> 0:20:04.200 and quality and yields and so forth. So the very 0:20:04.240 --> 0:20:08.440 process of producing a car is in some ways that 0:20:08.600 --> 0:20:11.760 secret source. And so if Toyota, for example, or Ford 0:20:11.920 --> 0:20:14.880 was to work out exactly the right way to make 0:20:14.920 --> 0:20:18.399 a car over and say a ten year production run, um, 0:20:18.440 --> 0:20:21.720 it's kind of a thing that they wouldn't necessarily want 0:20:21.800 --> 0:20:23.920 to hand out to somebody else. But the other thing 0:20:24.040 --> 0:20:30.360 is with safety standards. Um, you have to be very meticulous, 0:20:30.400 --> 0:20:33.160 and the way you produce a car is so connected 0:20:33.200 --> 0:20:36.239 to things like safety standards. And the final thing is, um, 0:20:36.440 --> 0:20:38.840 the product cycle of a car is much much much longer. 0:20:38.880 --> 0:20:40.879 We're talking like a decade, whereas you know the product 0:20:40.880 --> 0:20:44.720 cycle of a phone iPhone, Apple has the longest product cycle, 0:20:44.720 --> 0:20:46.800 which is about a year. But you know Samsung and 0:20:46.880 --> 0:20:49.080 shower Me or whatever, they come out with a new 0:20:49.080 --> 0:20:51.320 product like every three to six months or even less. 0:20:51.320 --> 0:20:54.960 So it's a very quick turnaround, and so they kind 0:20:55.000 --> 0:20:58.680 of need the external help to help put these devices together. 0:20:59.000 --> 0:21:02.520 I think that's really the difference. So walk us through 0:21:02.680 --> 0:21:06.600 fox CON's thinking here and what they see exactly as 0:21:06.600 --> 0:21:10.440 their competitive advantage. Because on the one hand, yes, EV 0:21:10.640 --> 0:21:13.560 is very hot right now, everyone is probably going to 0:21:13.680 --> 0:21:16.879 end up having one in the future. But on the 0:21:16.880 --> 0:21:19.919 other hand, especially in places like Asia, the market is 0:21:20.119 --> 0:21:24.800 incredibly crowded. It feels like a new EV manufacturer springs up, 0:21:25.240 --> 0:21:27.520 you know, every week or every month and then probably 0:21:27.560 --> 0:21:31.760 has problems soon after. But what exactly is the opportunity 0:21:31.800 --> 0:21:33.679 here and what does fox Can think it can do 0:21:33.800 --> 0:21:38.960 better than other EV manufacturers. Well, what's interesting, I think 0:21:39.200 --> 0:21:41.240 is that you think a fox Can has being the 0:21:41.240 --> 0:21:43.080 iPhone assembler, and you think, wow, if they're going to 0:21:43.119 --> 0:21:45.040 do evs, they're going to be all about the e 0:21:45.160 --> 0:21:47.840 V assembling with big factories like you'd see in Detroit, 0:21:48.480 --> 0:21:50.960 that's actually not quite their thinking. They are more thinking 0:21:51.000 --> 0:21:54.920 in the nineties model, which is in the ES when 0:21:54.920 --> 0:21:57.640 desktop PCs were, you know, the biggest thing out there. 0:21:58.480 --> 0:22:00.879 It was very modular. You open up a PC and 0:22:00.920 --> 0:22:04.200 it's very very modular, and you've got standard reference designs 0:22:04.200 --> 0:22:06.160 for what it would look like. And you know at 0:22:06.160 --> 0:22:08.479 that time you have you know, m D and Intel, 0:22:08.520 --> 0:22:12.719