Two Taiwanese electronics billionaires are teaming up on semiconductors, which is one of the hottest areas of technology in the world right now.
Terry Gou’s Foxconn, the world’s biggest electronics assembler by revenue, has formed a joint venture with electronics-component maker Yageo, founded and led by Pierre Chen, to expand into the supply chain for semiconductors.
The two Taiwan-based companies announced in a statement last week that they had agreed to form XSemi, a venture that will let both sides extend their business into chips, which are used in all sorts of devices, servers and cars. The new company, to be based in the island’s high-tech hub of Hsinchu, will work with semiconductor companies in product design, sales channels and process and capacity planning, according to the statement, adding that XSemi will “create a complete semiconductor supply chain” that offers “high-quality products and stable supplies.”
“I don’t see many challenges for this cooperation,” says Brady Wang, an associate director in Taipei with market-analysis firm Counterpoint Research. “The new company will help Foxconn further strengthen its position as a one-stop shop and enable Yageo to find a stable customer source for its products.”
Foxconn and Yageo are probably eyeing future growth in small chips for electric vehicles and connected devices made for healthcare, says Neil Mawston, executive director of global wireless practice with market research firm Strategy. “EVs and IoT have a decade or two of growth ahead, and now is the time to start developing chips for them,” Mawston says. Foxconn’s deal to build EVs with U.S.-based startup Fisker Inc., among others, means it wants to “secure vertical supply in-house of critical semiconductors,” he says.
The two companies entered into a strategic partnership last year to advance Foxconn’s EV business by sharing Yageo’s experience in EV components, 5G technology and semiconductor packaging. “Foxconn understands that the production of consumer products and EV needs a reliable source of semiconductors,” Wang says.
Global demand for PCs that surged during last year’s pandemic stay-home orders coincided with rising orders for 5G phones and electric vehicles, sparking a worldwide chip shortage and prompting major producers to announce expansions in capacity.
“The semiconductor industry is facing the biggest upheaval in the past three decades, and the industry order will face a serious restructuring,” Foxconn Chairman Young Liu said in the statement. “Now is undoubtedly the best timing to initiate strategic partnerships in various segments.”
Eventually Foxconn can use its “operational excellence to address the global semiconductor supply crunch” while delving into an “underserved” component industry, Mawston says. But he cautions that reaching the scale and skill levels to make complex semiconductors could take five to 10 years.