Apple Supplier Foxconn Aims To Buy EV Production Facilities In Bid To Target Growing Sector

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Taiwan's Hon Hai Precision Industry Co., Ltd, also known as Foxconn, has entered into early-stage talks with Vietnamese auto manufacturer VinFast for a potential partnership to manufacture electric vehicles. The report comes courtesy of Reuters' inside sources, with the publication claiming that Foxconn is interested in the car company's electric vehicle manufacturing lines. Interest in the contract manufacturer's plans for automobile production has peaked as reports of Cupertino tech giant Apple, Inc - one of Foxconn's biggest clients - plans to develop an electric car have once again started to make rounds in the industry.

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Early reports of the deal suggest that Foxconn and VinFast are at odds about ownership of the latter's electric vehicle manufacturing facilities. Foxconn prefers to buy them from the company and then produce cars for its clients all over the globe while VinFast is looking to preserve its brand image and enter into a partnership with the contract manufacturer.

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Discussions between the two parties come as Foxconn continues to aggressively expand its facilities in Vietnam on the backdrop of increasing tensions between the United States and China. The company is expected to invest up to $700 million in Vietnam this year as it received a license to build a plant in the country for manufacturing consumer electronics products such as laptops and tablets. Through its new facility in Bac Giang Foxconn intends to produce eight million of the gadgets, with rumors suggesting that the facility is a result of Apple's desire to diversify its supply chain away from China.

At the same time, Foxconn is busy negotiating with a carmaker to provide contract manufacturing facilities for a host of companies including Fiat Chrysler and Fisker. The company has also entered into a deal with a Chinese electric vehicle company for providing contract manufacturing facilities to automakers.

A render of electric vehicle maker Canoo's skateboard chassis. The company has also been rumored to have been approached by Apple. Image: Canoo

Foxconn is looking to set itself up to remove a pain point of a host of electric vehicle startups inside the U.S. and abroad. As companies, often funded by Special Purpose Acquisition Companies (SPACs) look to capitalize on the growing demand for electric vehicles, the biggest hurdle they run into is investing significant sums into production facilities.

By placing itself as a contract manufacturer for such companies, Foxconn aims to not only remove the companies' manufacturing headaches but also move into the space before other companies have the chance.

Foxconn has also started manufacturing displays in a Vietnamese plant in the Quang Ninh province. It is also reportedly considering manufacturing electric vehicles in the promised facility in Wisconsin, but these plans might make their way into Mexico - potentially due to lower labor and other costs.

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Should it succeed in setting up contract manufacturing electric vehicle lines then the company will effectively set the electric vehicle industry for a phase of expansion as manufacturers eager to get their products to the market find an easy source for production.

For its part, Apple, which has reportedly been in discussions with Korean carmaker Hyundai is yet to find a manufacturing partner for its Apple Car project according to publicly available information. Apple's planned inroads into the auto segment come as the company diversifies its Mac computer lineup with self-designed processors built by contract chip manufacturer Taiwan Semiconductor Manufacturing Company (TSMC).

The author has no position in any of the stocks mentioned. WCCF TECH INC has a disclosure and ethics policy.
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