Hon Hai – Diversification Beyond Apple into Semiconductor & EV Space Key to Long-Term Growth

We deep dive into the earnings performance of the world’s largest smartphone EMS and potentially the largest EMS player by revenue – Hon Hai (Foxconn Group).

Short-Term Performance & Outlook: Apple remains the foundation, Cloud & Components business bright spots

  • Hon Hai”s 2Q’21 revenue climbed to NT$1351 Billion ($48.55 Billion), was in line with the expectations from the group’s revenue perspective, growing 20% YoY compared to last year which was the break-out quarter for the pandemic.
  • The localized production strategy is helping Hon Hai to somewhat alleviate the pandemic effect which is going on in waves.
  • Smart Devices business remain strong growing 29% YoY in revenues, thanks to its biggest customer Apple whose iPhone shipments grew also coincidently 29% YoY during the June-ending quarter.
  • Cloud Networking & Computing segments saw a slow down in revenues compare to a stronger demand in last year’s quarter. However, Hon Hai expects the cloud & networking products demand to pick up in Q3 2021.
  • Overall the company’s Gross margin remains stable at a 6% level with Operating income and net income still hovering around the 2% mark each.
  • We estimate the revenue to grow around 5% levels in Q3 2021, driven by cloud and computing segments offsetting a slow quarter for smart devices business (re: Apple) and some headwinds from component supply crunch as well as pandemic peaking in some Asian markets, home to company’s operations.

Counterpoint Research - Honhai Margins Analysis - Q2 2021

Long-Term Strategy & Outlook: Boost Gross Margins

  • Looking at the new growth segments globally with AI, Robotics and Electric Vehicles, Hon Hai wants to cash in on these segments via its F3.0 strategy
  • For example, Hon Hai made  series of investments, partnerships, and new alliances over the last 12 months in the EV Space with huge ambitions to capture more value across the EV value chain from semiconductors to chassis design to software to assembling to services.
  • Hon Hai wants to capture atleast 10% of the $600 Billion EV market by 2025. This translates into 3-4 million EV units per year or $60 Billion in revenue.
  • Hon Hai with a vertical approach across the EV stack looks to lift its group Gross Margins up from 6% to 10% levels.

  • From a semiconductor perspective, Hon hai also wants to control the upstream supply chain for a more integrated offering, have invested in:
    • 8-inch wafer fab (DNex/ SilTerra, Malaysia) – focusing on mature nodes 110nm
    • 6-inch wafer fab from Macronix in Hsinchu to develop components such as SiC MOSFETs for EVs
    • KoreSemi in Qingdao
    • GigaSolar Materials to develop EV Battery materials
  • From software and services perspective, If Tesla is the iPhone of the EV market,  HonHai wants to become the “Android” of the EV market via its EV Open Market platform. So this is from a software perspective.
  • From a hardware perspective, Foxconn is also looking to set up additional factories in Thailand and the USA to produce EVs via contract manufacturing (e.g. Fisker, Byton, Geely, Stellantis) and for prospective new entrants relying on the company for the entire EV stack.

For more insights on Hon Hai’s EV Strategy, read – Will Foxconn Shake EV Industry?

So in summary, Hon Hai’s long-term strategy look solid as it looks to diversify beyond the smart devices business which is yielding very low margins to segments that can yield higher margins with more control over the entire stack. Though, execution would be the key to really become the Android of EV market.

Watch the full interview below:

Neil is a sought-after frequently-quoted Industry Analyst with a wide spectrum of rich multifunctional experience. He is a knowledgeable, adept, and accomplished strategist. In the last 18 years he has offered expert strategic advice that has been highly regarded across different industries especially in telecom. Prior to Counterpoint, Neil worked at Strategy Analytics as a Senior Analyst (Telecom). Neil also had an opportunity to work with Philips Electronics in multiple roles. He is also an IEEE Certified Wireless Professional with a Master of Science (Telecommunications & Business) from the University of Maryland, College Park, USA.

Apple Snack Pack


Understanding iPhone

Term of Use and Privacy Policy

Counterpoint Technology Market Research Limited


In order to access Counterpoint Technology Market Research Limited (Company or We hereafter) Web sites, you may be asked to complete a registration form. You are required to provide contact information which is used to enhance the user experience and determine whether you are a paid subscriber or not.
Personal Information When you register on we ask you for personal information. We use this information to provide you with the best advice and highest-quality service as well as with offers that we think are relevant to you. We may also contact you regarding a Web site problem or other customer service-related issues. We do not sell, share or rent personal information about you collected on Company Web sites.

How to unsubscribe and Termination

You may request to terminate your account or unsubscribe to any email subscriptions or mailing lists at any time. In accessing and using this Website, User agrees to comply with all applicable laws and agrees not to take any action that would compromise the security or viability of this Website. The Company may terminate User’s access to this Website at any time for any reason. The terms hereunder regarding Accuracy of Information and Third Party Rights shall survive termination.

Website Content and Copyright

This Website is the property of Counterpoint and is protected by international copyright law and conventions. We grant users the right to access and use the Website, so long as such use is for internal information purposes, and User does not alter, copy, disseminate, redistribute or republish any content or feature of this Website. User acknowledges that access to and use of this Website is subject to these TERMS OF USE and any expanded access or use must be approved in writing by the Company.
– Passwords are for user’s individual use
– Passwords may not be shared with others
– Users may not store documents in shared folders.
– Users may not redistribute documents to non-users unless otherwise stated in their contract terms.

Changes or Updates to the Website

The Company reserves the right to change, update or discontinue any aspect of this Website at any time without notice. Your continued use of the Website after any such change constitutes your agreement to these TERMS OF USE, as modified.
Accuracy of Information: While the information contained on this Website has been obtained from sources believed to be reliable, We disclaims all warranties as to the accuracy, completeness or adequacy of such information. User assumes sole responsibility for the use it makes of this Website to achieve his/her intended results.

Third Party Links: This Website may contain links to other third party websites, which are provided as additional resources for the convenience of Users. We do not endorse, sponsor or accept any responsibility for these third party websites, User agrees to direct any concerns relating to these third party websites to the relevant website administrator.

Cookies and Tracking

We may monitor how you use our Web sites. It is used solely for purposes of enabling us to provide you with a personalized Web site experience.
This data may also be used in the aggregate, to identify appropriate product offerings and subscription plans.
Cookies may be set in order to identify you and determine your access privileges. Cookies are simply identifiers. You have the ability to delete cookie files from your hard disk drive.