Why Foxconn’s next bid for growth is a room on wheels

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Cars do little when parked in the garage. But what if they can also be an extra room? An electric minivan that doubles as a room on wheels — a living room with a home theatre or a study for zoom meetings — could make better use of a parking space.

For Japanese electronics group Sharp and its Taiwanese parent Foxconn, this boxy vehicle is a bid to find new sources of growth. The electric minivan prototype, called the LDK+, uses an EV platform developed by Foxconn. It is meant to operate as an extension of the home for the space-constrained, with a living room-like interior, rotating seats, a Sharp LCD display, air conditioning and AI-controlled lighting. 

It also has practical uses. The electricity stored in the EV battery, via its solar panels, can be used for both the car and the home, useful in areas prone to outages. 

Finding a new source of demand for Sharp’s electronics is needed, especially TVs and smaller home appliances. It has been struggling with losses in its liquid crystal display TV business, on mounting restructuring costs and declining panel prices. This year, it is halting production of large LCD panels at its plant in Osaka — the last factory in Japan that has the capacity to produce large LCD panels for televisions.

Foxconn, best known for assembling iPhones, has even more riding on the LDK+. It manufactures about 70 per cent of the world’s iPhones. In the early 2000s, this was a lucrative business. But as global smartphone sales slowed, and with rivals from Taiwan and China chipping away at its contract manufacturing business, it urgently needs new growth options.

As a result, it has bet big on becoming the go-to contract manufacturer for global auto companies. The LDK+ would use its EV platform, which provides components including batteries and wheels. The unusual design might challenge concerns that outsourcing production to one manufacturer will result in undistinguishable, boring cars.

A hit Foxconn EV would give it the chance to win over automakers and to recoup the cost of building up its manufacturing capacity. Mounting price competition from Chinese EV makers in the past year means that global companies wanting to get an EV to market quickly could benefit from using outsourced production, cutting down supply chain costs.

Foxconn runs on razor-thin margins: operating margins are below 3 per cent. It has been investing heavily in a wide range of businesses, including AI servers, automotive chips and satellites, to diversify its contract manufacturing business beyond consumer electronics.

Investors are unconvinced. Foxconn’s shares are up around a quarter this year but on 13 times forward earnings still trade at a discount to Chinese rivals such as Luxshare. Sharp’s stock has struggled, given the weak outlook for its LCD business. Despite aircon and AI lighting, the stakes riding on the LDK+ may not make for a comfortable ride.

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