Foxconn HNHPF and Huawei Technologies are both expanding their presence in the nascent business to build smart cars. It's a sign that Asian tech companies best known for their smartphones are intent on extending their offering into the auto industry, providing the software and tech hardware to supplement engines and car frames made by auto specialists.
Taiwan-based Foxconn this week announced a new company, Mobile Drive, that is a 50-50 joint venture with Stellantis (STLA) , itself the product of the merger at the start of this year between Peugeot and Fiat-Chrysler. Foxconn, best known as the company that puts together iPhones, is the largest supplier to Apple (AAPL) .
Huawei, meanwhile, has aspirations to make its own vehicles under its own brand. It is as of April 21 selling Seres brand electric vehicles at Huawei flagship stores in China. Huawei is reportedly in talks to take control of the Chinese parent of Silicon Valley-based Seres, formerly known as SF Motors, as well as to produce complex chipsets for smart cars.
Mobile Drive will combine the expertise of Foxconn in consumer electronics with the Chrysler/Fiat/Peugeot know-how in building cars. Foxconn's hardware and software will form an in-cabin information and entertainment system that will connect to other devices both inside and outside the car.
Connectivity will be the next development for smart cars, building on the efforts of carmakers to move the industry away from gasoline-driven motors. It's a recognition that the strength of smart-cockpit software systems, just as much as horsepower and torque, will be selling points in the next generation of smart vehicles.
Stellantis and Foxconn will co-own any systems developed by Mobile Drive. Besides serving the Stellantis stable, Mobile Drive, which is based in the Netherlands, will act as an automotive supplier, developing smart-car systems for third-party automakers, too. Future systems will use Artificial Intelligence, 5G communications, cloud computing and Big Data to make cars more wired.
Foxconn - full name Hon Hai Precision Industry - is one of China's largest employers. It started working with Fiat Chrysler on the Airflow Vision concept car from Chrysler, which was shown off at the Consumer Electronics Show in Las Vegas in January 2020.
Huawei is in talks to buy a controlling stake in the parent company of Seres from the Chinese carmaker Chongqing Sokon, Reuters reports. If it does buy control of that unit, Chongqing Jinkang New Energy Automobile, it could expand beyond selling Seres cars and begin making them under the Huawei name.
Seres, based in Santa Clara, California, was originally set up to make electric vehicles in the United States. It bought a plant in Indiana in 2017 from the makers of Hummer vehicles, AM General, but halted plans for U.S. production in 2019. It instead is producing two models of electric SUVs in Chongqing, in central China. The vehicles contain Huawei electronics systems.
As of last July, Huawei also has a smart-car partnership with Changan Automobile SZ:000625, another Chongqing-based carmaker. Changan is one of China's "Big Four" largest carmakers, having formed joint ventures with Ford Motor (F) and Mazda Motor MZDAY.
Huawei is expanding that partnership with Changan to incorporate the design and development of semiconductor chips for smart cars, according to Reuters, citing four sources. That may soon yield the creation of a separate chipmaking entity.
Huawei has been struggling to get the complex chipsets that it requires to make its smartphones due to U.S. sanctions on the company. That has seen its market share, which peaked at 20% in mid-2020, slip to just 4% in the first quarter of 2021, according to Counterpoint Research. Its 2020 sales made it the world's largest seller of smartphones alongside Samsung Electronics, which also claimed 20% of the market. Samsung remains the world's market leader now, with 22% market share, while Huawei has seen a precipitous decline.
The Shenzhen-based electronics company is therefore understandably keen to expand into new growth areas. It has set up its first chip-fabrication plant in Wuhan and is also reportedly looking at working with a partner to perform chip research-and-development and design at a semiconductor base in Shanghai.
U.S. sanctions prevent any company from using U.S.-designed software or hardware to make parts that it supplies to Huawei. That has robbed the company of advanced chips. The company is therefore intent on building its own domestic chip business, with tech self-sufficiency high on the list of priorities in China's latest Five-Year Plan.
