INDEX

Foxconn Industrial Internet

IPO Will Accelerate Manufacturing Tech Boom

June 18, 2018, 3:23 p.m.
Pierce Owen, Principal Analyst

Share:

Foxconn Industrial Internet (FII), a subsidiary of Foxconn, had its IPO on the Shanghai Stock Exchange on June 8, 2018, when its stock increased by 44%, making it the largest tech company in mainland China. Most of the world knows Foxconn, a Taiwanese manufacturer officially named Hon Hai Precision Industry Co., as the manufacturer of the Apple iPhone. While Apple still accounts for around half of its total revenue, Foxconn rakes in more revenue than all but three technology companies worldwide.

FII, which generated US$56 billion in revenue itself last year, raised more than US$4 billion in the IPO to fund eight projects including smart manufacturing platforms, cloud service equipment, and 5G solutions, with an announced focus on Artificial Intelligence (AI). FII already has investments from the three top Chinese Internet companies: Baidu, Alibaba, and Tencent. In addition to Apple, FII already counts Amazon, Cisco, Dell, Huawei, and Lenovo as clients.

Neither FII nor its parent company has joined the Alliance of Industrial Internet (AII), the Chinese government’s Industrial Internet of Things (IIoT) initiative, although FII does collect subsidies from the Made in China 2025 policy. Still, FII presents an interesting case due to its impressive revenues and its parent company’s operations as a contract manufacturer. FII develops software and builds hardware, including precision tools, servers for cloud services, and industrial robots. As stated above, FII has several important clients outside of Foxconn and has drawn serious interest and investment from the Chinese tech community.

Foxconn and FII have a somewhat unique position as such a large technology contract manufacturer with far-reaching resources. An integrated smart manufacturing platform and 5G connected robots with AI-based predictive and prescriptive analytics could empower it to fulfill more custom orders while improving quality assurance.

Right now, FII serves as an OEM for much of the hardware related to smart manufacturing upgrades. It appears that it hopes to move up the stack to provide more software, networking, and cloud services to go with the equipment it produces. It certainly plans on integrating cloud computing capabilities with its parent company’s operations. Presumably, it will work with Huawei, one of its clients, to build the 5G communication networks for Foxconn’s factories.

Competing IIoT companies have similar opportunities but will need flexible partner ecosystems to take advantage of them. Database management systems like SAP HANA will need to work with IIoT platforms such as PTC ThingWorx and Siemens MindSphere as well as additive manufacturing platforms; edge intelligence specialists like FogHorn; gateway providers such as Eurotech, Dell EMC, and HPE; virtualization specialists such as VMware; and cloud infrastructure providers such as AWS and Azure. FII might try to do all of this itself, and it will manufacture the hardware for many of these other companies; however, a group of specialists will meet more needs than a company that tries to do everything itself. A jack of all trades is a master of none, but oftentimes better than a master of one, but not better than an ecosystem of masters.

For more insights and perspectives on manufacturing, please check out ABI Research’s Smart Manufacturing Research Service.