Chairman Young Liu, who is also the chief executive officer, is developing a strategy to have the heads of different business units take turns holding the latter role, probably for six-month terms.
Punk rock is the sound of Foxconn’s Musical Chairs.
In the half-century since Foxconn Technology Group’s founding, just two individuals have held executive positions. Now, in the course of three years, up to six more could be added to the roster. Although this executive musical chairs game is dangerous, it might be worthwhile given the potential rewards.
Chairman Young Liu, who is also the chief executive officer, is developing a strategy to have the heads of different business units take turns holding the latter role, probably for six-month terms.
A trial of the new technology began in April, and further information is probably going to be revealed at Foxconn’s shareholder meeting in June. Few businesses use this unique tactic, and none with yearly sales of more than $200 billion. Musically, it’s more punk rock than classical; it’s snappy, hard-edged, and rejects corporate dogma.
Reports have suggested that one possible result could be the end of the one-man rule. This looks improbable. The chairman and chief executive officer of Western firms are typically kept apart. Few individuals could name the chairman of Apple Inc., Alphabet Inc., and Tesla Inc. (Robyn Denholm, John Hennessy, and Art Levinson, respectively). The chairman is a ubiquitous figure in Asia. Alternatively known as Taiwan Semiconductor Manufacturing Co.
There is no such thing as a non-executive chairman, as founder and former chairman Morris Chang once informed me. In his final years at the company, Chang had two co-CEOs, but we all knew who was in charge.
The Chinese manufacturer of communications equipment and cellphones, Huawei Technologies Co., is the closest analog of Foxconn. Since 2011, it has rotated every six months, with the chairman serving as the change agent. Whether that has been an effective strategy is difficult to determine. Despite being hindered by US regulations, the company’s annual sales increased 3.45 times between 2011 and the previous year.
grew 1.78 times throughout the time frame. Therefore, it is possible that the Chinese behemoth has benefited by switching around every six months.
What works well for one business may not always be the best for the other, though, as there are enough distinctions between the two. Huawei is not a publicly traded company, hence it is not required to
every quarter to stockholders. Perhaps the most obvious difference is that, unlike the various divisions Terry Gou’s company initially established, Huawei operates more like a single unit. Furthermore, under its own brand, the Chinese corporation designs and produces goods. Foxconn is responsible to numerous external customers, such as Huawei, Dell Technologies Inc., Sony Group Corp., and Apple Inc.
These two Foxconn quirks make a new leadership approach so tempting—but also extremely dangerous. The company is so deeply compartmentalized that the chairman and a small group of lifelong employees are the only ones who truly comprehend the whole empire. Under Gou’s direction, it was thought for many years that he was the only person who could keep everything together. More than ten years ago, during Gou’s tenure, an insider informed me that the founder was so essential to the company’s smooth functioning that his departure would cause numerous division chiefs to resign and the business as a whole to come to a complete standstill.
Even though Foxconn is still in operation and made its biggest profit in seven years last year, Gou moved down in 2019. That there was no obvious front-runner to succeed him, nevertheless, speaks volumes before his retirement. Like Gou, Liu probably gained the position in part because of his background in starting and growing companies from the ground up, at least one of which was eventually sold to Foxconn.
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Liu has previously displayed some of that original thought. He quickly overthrew decades of philosophy holding that even such banal information were too private to share when he instituted quarterly investor calls, complete with revenue breakdowns and forward guidance.
The most audacious move he has made is to shift the company’s focus to electric cars, with plans to supply everything from semiconductors to final assembly. One motivation is to try and catch a new wave of growth as the smartphone boom wanes, while simultaneously trying to lessen the company’s dependence on Apple.
This plan may very well backfire. Even while the market for electric vehicles is expanding, it’s unclear how Foxconn will fit into that industry. However, investing a significant amount of capital and managerial attention in an unproven venture is as close to startup culture as it gets for a corporation employing over 700,000 people; if it succeeds, the rewards might be enormous.
For its new managerial style, the same can be argued. To make crucial judgments in advance of the September debut of the iPhone, for instance, could be terrible if the head of a TV division were to step in. But new concepts might be exactly what’s required. Because Foxconn has grown to be so big and reliant on a single client, continuing business as usual would really be the riskiest course of action. The C-suite is the ideal place to start when looking for entrepreneurial spirit in the largest electronics company in the world.
