Foxconn forms joint venture with Yageo to tackle chip shortage, support EV growth

12, May. 2021

Foxconn chairman Liu Young-way (R) and Yageo chairman Pierre Chen signing their agreement to set up a joint venture firm XSemi Corporation on May 5, 2021 in Taipei. (Photo courtesy of Yageo Corp.)
Foxconn chairman Liu Young-way (R) and Yageo chairman Pierre Chen signing their agreement to set up a joint venture firm XSemi Corporation on May 5, 2021 in Taipei. (Photo courtesy of Yageo Corp.)

By Gloria Cho

TAIPEI, NNA - Global electronics giant Foxconn Technology Group is expanding its presence even further with a new partnership with passive component maker Yageo Corp. to churn out small integrated circuits (ICs) that are widely used in electronic devices.

The setting up of their joint venture company, XSemi Corporation, in Taiwan, comes at a time of global chip shortage affecting manufacturers of cars and electronics. It will produce lower-priced chips averaging below $2 to create a steady supply for Foxconn’s current needs and emerging technologies in future.

In a joint press statement, Foxconn chairman Liu Young-way, said, “The semiconductor industry is facing the biggest upheaval in the past three decades, and the industry order will face a serious restructuring. Now is undoubtedly the best timing to initiate strategic partnerships in various segments.”

Foxconn, also known as Hon Hai Group, said the two companies are currently having talks with "several global semiconductor companies" and will soon announce more collaboration plans in the semiconductor industry.

The Hsinchu-based XSemi will complete Foxconn’s chip repertoire after having achieved capabilities across semiconductor equipment, design, services, IC design in 5G, AI, CMOS Image Sensors (CIS), and display driver, foundry fabs, and advanced packaging, said Foxconn which counts tech giants such as Apple among its top clients.

Industry watchers believe Foxconn’s latest move would help alleviate any tight chip supply as the production of electric vehicles is expected to take off for rapid growth in the next few years. Also, small ICs account for more than 90 percent of semiconductor components in EVs.

Yageo's latest collaboration with Foxconn is seen as a natural extension of their strategic alliance last year to advance Foxconn’s new electric vehicle business by relying on Yageo’s years of experience in EV components. The move will also support Foxconn's diversification into digital health.

Driven by the demand for EV and consumer electronics, the global market for power semiconductor is expected to reach $44.2 billion by 2025, while analog semiconductor will grow to $25 billion.

Known for its strengths in passive components, which are electronic parts that absorb energy, hardware firm Yageo will be able to build a more complete portfolio by expanding into semiconductors.

Pierre Chen, chairman of Yageo, which has a global network of clients, said, “Yageo aims to create a one-stop shop for its customers, and through this joint venture, we will further provide the services and products that meet customers’ need for supply chain optimization.”

Details such as stake ownerships and production capacity would be revealed later in the year, a Yageo spokesperson told NNA.

Yageo logged NT$9,017 million ($324.6 million) in consolidated sales in April, a 103.1 percent jump from a year ago. The big leap is due mainly to a steady increase in capacity utilization in its factories in Greater China and strong demand from customers, said the company.

Foxconn also saw its April consolidated revenue grow, up by 31.39 percent from 2020 to reach NT$500.5 billion. Its revenue so far for this year totaled NT$1,843.82 billion, a 40.68 percent increase from the previous year.