Foxconn spots opportunity in global semiconductor crisis

Today, the world’s largest electronics manufacturer, Foxconn, has announced it will be forming a joint venture with Yageo Group to develop small Integrated Circuits (ICs), targeting the lower end of the semiconductor market.

 

The joint venture, set to be called XSemi, will focus on creating ‘small ICs’ with average sale prices below $2, seeking to not only create a steady semiconductor supply to the company’s current communication applications and future emerging technologies, but also fulfil the needs of international customers.

 

The companies have already entered discussions with various global companies within the industry to create a more complete supply chain, with collaborations set to be announced in the near future. 

 

Currently, the semiconductor industry is in the midst of a major supply crisis. At the start of the pandemic last year, many of these companies temporarily paused production, citing health concerns and a sudden drop in demand from the likes of the automotive industry. However, as the pandemic shifted all of our lives online, the demand for digital devices soon soared to new heights and, despite a rapid return to production, demand now greatly exceeds demand throughout the industry.

 

This has been especially crippling for the likes of the automotive players, who have found themselves at the back of the queue, suddenly competing with the likes of Apple and other device manufacturers who are paying through the nose for the manufactures production capacity. 

 

This enormous disparity between demand and supply has potentially created an opportunity for any company that can rapidly step in to occupy that space.

 

“The semiconductor industry is facing the biggest upheaval in the past three decades, and the industry order will face a serious restructuring,” said Young Liu, Chairman of Hon Hai. “Now is undoubtedly the best timing to initiate strategic partnerships in various segments.

 

“Yageo aims to create a one-stop shop for its customers, and through this joint venture, we will further provide the services and products that meet customers’ need for supply chain optimisation,” said Yageo’s chairman Pierre Chen.

 

Despite the semiconductor industry’s best efforts to ramp up production, the semiconductor supply crisis is set to continue for many months, perhaps even years. If Foxconn and Yageo move quickly, they put themselves in an excellent position to capitalise on the situation, picking up orders from like likes of Apple, who are already one of Foxconn’s top clients.