Mr Gou's report to shareholders was inadvertently exposed

Now the Enterprise PR has learned that Apple "inadvertently", "inadvertently" exposure to their own insider, spy photos, look at the natural front. But being careless can also reveal a certain kind of risk.

Yesterday, Mr. Gou's report to the shareholder was "inadvertently" exposed earlier. Hon Hai Group will convene a shareholder meeting on June 25, and in his report to shareholders, Mr Gou once again exaggerates the strategy of Hon Hai Group, the blueprint of "eight screens and one cloud". I've seen it in the short term, which is a risk for industry and even for the entire manufacturing sector.

Let's look at what Mr Gou has said about the core points in the shareholder book.

1, post-PC era caused the transfer of industrial structure, the former hardware brand war, will be transformed into "ecosystem warfare", industry consolidation and acquisitions continue to occur, highlighting the enterprise must establish a new business model, in order to break through the siege and stand out in the trend.

2, Hon Hai has from the past "integration-innovation-design-production" (IIDM) manufacturing base, into the cloud services, 4g-lte Networking Services, the construction of a complete "eight screen One Cloud" blueprint, will cover work, education, entertainment, social/family, security, health, electricity, environmental protection car, such as 8 new technology life, and is committed to the development of automation and intelligence, integration of soft and hardware strength.

3, 2014, the big environment is uncertain, the technology industry continues to shuffle, Hon Hai will deepen the global layout, thick plant strength, grasp more opportunities for growth. The actual technical layout, attaches great importance to new products, new applications and new technology research and development, and actively recruit professionals in various fields, in information, communications, consumer electronics, automation equipment, optoelectronics, precision machinery, electric vehicles and other fields, lay from components, modules to assembly products, integrated services and rapid production strength.

Do you see anything? It seems that Mr Gou is very calm. I realized the following points:

1. Gou has a deep sense of crisis in the existing foundry model.

In the past 40 years, although the Hon Hai has already had the system service ability, but the overall hardware generation is in the dominant position.

2, Gou's love and hate for key customers like Apple;

In my opinion, "the old hardware brand war will turn into an ecosystem war", and Mr Gou has a vague point about his new perceptions of customers like Apple. Although they are the king, but are tied too deep, and even many product lines are specifically tailored for the apple, Hon Hai has come out of the brand control stage, must find their own new life.

3, Gou has revised for the Hon Hai set 7C strategy, from the focus on products and services to the transition to the deepening of the people's livelihood, "eight screen a cloud" to the soft and hard integrated cloud service model, become a platform for the giant.

Let's start a little bit. Hon Hai has indeed gone through a purely generational stage. It has a strong contract manufacturing capability, or it will not be able to grab orders from giants such as Apple.

In a recent article, "Terry Gou's revelation of selling patents to Google", I mentioned that Foxconn is by far the most core patents in Taiwan. 2010, in the United States to apply for 1438 core patents, the only two banks to enter the world's Top 50, listed 13th, 2011 into the world's top 10, 9th, 2013, again to the front. Its name with global patent champion IBM, Samsung, Canon is getting closer. As of the first quarter of 2014, Foxconn's global cumulative application of more than 128,400 patents has been approved in the number of more than 64,300.

These patents were the first PC connector field, 10 years ago accounted for 94%, but last year only 24%, Foxconn's patents more and more concentrated wireless network communications, precision Optics, LED, graphic display, nanotechnology, automotive systems, robotics and other fields, and software technology reserves more and more.

Foxconn, which owns the patents, has so far left its revenues and core profits, but it is still consumer electronic orders such as Apple. It and the world's other foundry giant Flextronics competition, the division of the past few years is this, the latter many for industrial systems generation, of course, it has its own suffering, is the foundry scale by Foxconn dumped a few streets, because the consumer electronics foundry scale is larger.

But compared with Flextronics, Foxconn is more volatile, which is directly linked to the consumer electronics market. Up to now, Apple bundled Foxconn so deep, even the mainland's production layout, matching is around Apple. This is a rare scene in the history of global industry.

It's dangerous to get stuck with apples. It will shift the pressure of innovation to Foxconn, which is a major risk in its operations as manufacturing upgrades become more complex and Foxconn Maki.

Here's the thing, you can probably see how Mr Gou is wary of Apple. Hon Hai's two most important production base, one is rich in Shenzhen, the other is Zhengzhou hung Fujin. 2013, their performance is not ideal, the most important reason is rework, that is, check production equipment process error, must be redone, you think, Foxconn's production lines, the huge, the cost is very high.

Can you understand what Terry Gou said a year ago? ' Apple IPhone5 is by far the hardest thing to do, ' he said. This is no coincidence, it is the biggest challenge of Foxconn's factories in the past year or so.

In early 2013, the industry came to the news that Foxconn produced IPhone5 Apple, due to the appearance of substandard Apple standard, poor function and other reasons, 5 million were returned. Gou even went to the headquarters of the Shenzhen Guanlan and supervised the good rate of the factory personally.

Returns are certainly not scrap. If you are scrapped, think about how much the company will lose if Apple iPhone5 the market price. Conservative point, rounding up an integer 5000 yuan, that is 25 billion yuan. You can see how deep an apple is tied up.

Of course, not scrap, but bring the production process, duration, human costs, technology, materials, all imply huge costs. Even with a product average cost of 200 yuan, but also to 1 billion yuan, almost occupy Foxconn last year net profit of 1/10.

IPhone5 has long been successful in shipping, and Mr Gou must be quite proud, but the matter itself should mark his heart. You know, in 2012, Shenzhen Rich Thai investment income of NT $23.2 billion, 2013 only 2.6 billion yuan, in 2012, Zhengzhou Hong Fujin income breakthrough 10 billion NT $, 2013 recognized the part of about 6 billion yuan.

The unconfirmed data is that Apple's OEM iphone and ipad have a net profit of only 2%. In this case, it is urgent for Hon Hai to get out of the volatile consumer-electronics industry, or to seek a relatively stable profit model.

Years ago, Mr Gou designed a 3C strategy for Hon Hai, namely, PCs, communications, consumer electronics, and later upgraded to a 6C strategy, namely, PCs, communications, consumer electronics, automobiles, channels, digital content. It was then added to the health-care technology and became the 7C strategy.

You can see, 7C strategy, focus is still on products and industry, it does not describe a platform for desalination model vision, not let Foxconn approached the public, you know over the past few years, it has been trying to expand the public life of contact, and further establish contact with consumers.

I think that Gou's latest sketch of the "eight screens and one cloud" blueprint is a relatively reasonable vision. This blueprint dilutes technology, products and industries, but packaging it into a life demand, covering work, education, entertainment, social/family, safety, health, electricity, environmental protection car, such as the 8 of major scientific and technological life, this is the optimization of Hon Hai Strategy, but also out of the labor grief, strengthen the brand influence of the key.

In the future, if Foxconn's brand value is in the forefront of the world, do not feel suddenly. This is its changing appeal.

Want to support the so-called 8 science and technology life, Hon Hai needs to be its own technology and production capacity platform for operation, especially research and technology at one end, take the road of intensification. In the past, because of the stringent requirements of brand manufacturers for intellectual property, many patent accumulations were unable to work together. If they move to the platform, consumption-driven growth, Foxconn can live in the industrial chain, and will not be branded manufacturers too deep.

This shows that the patent technology in the core value of Foxconn, if it only do processing, it will be because of the brand strength of the hostage, difficult to surpass, and even fell to the ground.

Of course, it is impossible for Mr Gou to talk about life, otherwise it will affect its professionalism, which is the latest development path he has designed for Hon Hai in technical language:

Hon Hai Service form, according to undertake range from big to small arrange as follows: IIDM (innovative integrated design manufacture, after the business of commodity Planning) →IDM (Integrated designing manufacture, After the basic design of the business) →ODM (Original design manufacture, details of the business) →JODM (joint Original, The detailed design of the brand enterprise after the business) →JDSM (joint design manufacture, brand enterprise guidance after the details of the business) →JDVM (joint Development, manufacture, Brand Enterprises after the volume production of the Business) →oem (Original equipment manufacture, brand-guided business after the volume production).

So, I think that's the background of what Mr. Gou said a while ago that Hon Hai should strengthen intellectual property operations. The Giants have come to a moment of changing patterns and defining industries. When the patent is enough to deal with market demand, why does Mr Gou have to be committed to a brand giant like Apple, which Foxconn can offer itself to the front-end consumption.

This is the secret of Foxconn's definition of 8 major technological life.

It is necessary to dilute the over-reliance on Apple. Of course not step, or Foxconn's short-term share price will fall to the end. So, as you can see, Mr Gou sold some of his communications patents to Google some time ago, and you know what these patents are for, mostly robots, which are the forward-looking layout of Hon Hai.

The layout of the robot, at Gou, does not look like news. For 2009 he shouted for 1 million robots to be mounted in the next few years. The so-called robot, in fact, is automation equipment, Hon Hai has a considerable patent. It had even established a joint venture with Google about robotics.

The layout of the robot, for Mr Gou, kill the birds. First, it is a technical side, it is a platform to integrate many technology and manufacturing forces, can release the accumulation of Foxconn, bring significant business opportunities, and second, it can reduce the cost of Foxconn's own production.

The first aspect does not say, says the second aspect. After a succession of suicides at Foxconn in 2009, Mr. Gou said it seemed that robots would have to replace human resources, weakening the sense of social ethical pressure, but behind it was a cost pressure.

There is a social dimension behind the jump, but it is also working with branded manufacturers such as Apple, which in turn presses workers in a vicious circle. The robot can save manpower and reduce the cost.

The cost of mainland China is indeed rising faster than in the past few years. But Foxconn can not leave, one is manpower, the second is the industrial distribution and supply chain, three market effect; Other places do not have the advantage of China.

The wages of Chinese workers have risen considerably over the past few years, and workers are under a lot of pressure. It has become necessary for Foxconn to build automation and replace part of the redundant workforce with robots.

However, this process must be long, because automation is not an overnight thing. Whether Mr Gou can see it before he retires completely is hard to say.

Under this pressure, Foxconn is also using other means to increase profitability. is to start to rely on interest, exchange and other income.

Earnings showed that in 2013, Hon Hai's earnings were poor, but pure earnings before taxes remained as high as NT $136 billion, up from 2012 to NT $18 billion. The reason for this is that foreign exchange gains have increased by 12.2 billion yuan.

It's a secret. It shows that the Giants in the industrial upgrading of the implementation of the financial skills, but also for the time being unable to escape from Apple and other brand giants of survival before the cage.

I also said that the last two days, Foxconn such a huge company, because of extensive procurement, high volume, in the inventory and logistics, there is a very rich interest in operating space, the formation of a kind of financial model is very easy, I think this is another embodiment of supply chain finance. So, some time ago, Hong Hai internal anti-corruption, grabbed a few buy mice, in fact, this is a kind of financial model under the drizzle.

But with all this, Gou could not get out of the cage. 2014 is the establishment of Hon Hai 40 years. 2013 consolidated revenue amounted to NT $3.952 trillion yuan, but the annual increase is only 1.2%, net profit of NT $106.697 billion, the annual increase of about 12.73%, the after-tax surplus of 8.16 yuan per share. I think, the revenue slows down, the net profit rises, to this foundry giant, is a kind of good movement, is only in the road leading to 8 big technology life, he and the brand giant's game cycle and the result, still unknown, this decides the Hon Hai's future.