Foxconn is reportedly restructuring its Android business and has placed a greater focus on the automotive segment instead. Specifically, unnamed sources cited by Nikkei Asian Review claim that FIH Mobile began reallocating employees and resources to a newly-established automotive-related project. FIH Mobile is a Foxconn subsidiary with the latter company owning 62-percent of it, and up until now roughly 90-percent of its revenue came from its Android smartphone business.
FIH Mobile struggles as the Android market slows down
Despite FIH Mobile having numerous clients in the Android segment, including Google, Lenovo, Xiaomi, Nokia, Sharp, Gionee, Meizu, and Smartizan, the company recorded a net loss of $857 million last year, representing its biggest loss since 2005 and a second consecutive year of not registering any profits. Sources familiar with FIH Mobile's current situation claim that its Android smartphone manufacturing business is "miserable" with Google being its only client deemed profitable.
This transition from Android to the automotive segment has been happening for a while, according to the source. About a year ago in Q2 2018, FIH Mobile project managers and research engineers have reportedly left the Android arm and more are expected to do the same in the future. Another source cited by the publication claims that no less than half of one of FIH Mobile's engineering teams focusing on mobile technologies was reallocated to the new automotive venture.
There are more than 2 billion active smartphones utilizing Google's platform at present and the Android market contains a very large portion of entry-level to mid-range devices – the two segments that seem more volatile for OEMs. The market is rather saturated and it may have reached its peak, or at the very least, smartphone manufacturers can no longer expect the same growth as they've experienced a few years ago.
This is one of the reasons why OEMs are now trying to revitalize the market with the new flexible form factor, but while some smartphone makers will come out on top throughout this transitional period, others might perish. Many smartphone makers – including LG – have braced for impact by lowering the number of smartphones they launch every year and, in turn, this obviously affects component suppliers such as FIH Mobile. A source familiar with the matter revealed that FIH now has three or four teams serving one client, but it used to be the other way around.
Jumping ship to automotive
While the smartphone business is slowing down, the automotive industry is seemingly going through a transitional period of its own where combustion engines are being replaced by electric drivetrains and vehicles become smarter and integrated with electronics components not too dissimilar from the ones employed by the mobile industry.
Several startups are now attempting to join the automotive industry with the rise of the EV, and China is the place where many auto-grade components are being manufactured, ranging from chipsets and self-driving systems to small and large infotainment touchscreens. It's also the place where many electric vehicles – the new Polestar 2 included – are being assembled.
Having said that, Foxconn's subsidiary seems to want and avoid recording further losses by focusing more on the emerging EV market and less on Android smartphones. FIH Mobile might still remain operational in the Android space but perhaps it will serve fewer clients, at least for the time being. It remains to be seen if other suppliers will be forced to take similar measures and gain an interest in the EV industry or other ventures as smartphone sales slow down.