Latest / Boardroom Conversations with Fexingo: CEOs, Strategy, and Corporate Leadership Explained / How the Foxconn Board Built an Apple Supply Chain Empire
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- Lucas: If you own an iPhone — and roughly one in eight people on Earth does — there is about a 70 percent chance that the device in your pocket was assembled by a single company: Foxconn. Luna: That's an astonishing concentration of manufacturing for the world's most valuable product. Lucas: Today we're looking at how the Foxconn board built — and now tries to protect — what is arguably the most complex supply chain operation in human history. Not just the scale, but the board-level decisions that locked them into Apple's orbit, and the risks that come with that dependency. Luna: And Foxconn isn't just an assembler. It's a proxy for how global electronics manufacturing actually works. Lucas: Right. Foxconn's official name is Hon Hai Precision Industry — it was founded in 1974 in Taiwan by Terry Gou, starting with just about $7,500 and a focus on plastic parts for TV knobs. The board's first big bet was on connectors and cables for PCs in the 1980s, which got them into Dell, Intel, and Compaq. Luna: But the Apple relationship didn't happen until much later, right? Lucas: Correct. The first big Apple contract came in 2001 — the original iPod. Foxconn's board made a strategic decision: they would build massive, vertically integrated campuses in China that could handle every step of production under one roof. The Shenzhen Longhua campus, for example, spans about 1.2 square miles and at its peak housed over 300,000 workers. Luna: And that was the template for the iPhone. When Steve Jobs needed to ramp up production from zero to millions of units in a matter of weeks, Foxconn could scale in ways competitors couldn't. Lucas: Exactly. The board approved building entire new cities — like the Zhengzhou facility, which is often called 'iPhone City.' At its peak, it employed over 350,000 workers and could produce 500,000 iPhones per day. That level of capacity required board-level capital allocation decisions worth billions of dollars, all tied to a single client. Luna: And Apple accounts for how much of Foxconn's revenue? Lucas: Over 50 percent in some years. It's a level of customer concentration that most boards would consider alarming. But the Foxconn board's view was that the volume and stability justified the risk — Apple's supply chain demands are relentless, but they're also predictable. The gross margins are thin — around 6 to 7 percent, and net margins hover near 2 percent — so volume is everything. Luna: That's a brutal margin profile. One bad quarter from Apple and Foxconn's profit gets crushed. Lucas: And that's exactly why the board has been trying to diversify. But before we get there, we should talk about the human cost. Because the board's decisions didn't just involve buildings and machines — they involved people. In 2010, a wave of suicides at the Shenzhen plant — 14 workers jumped from buildings — pushed Foxconn into a global labor crisis. Luna: That was a board-level test. How did they respond? Lucas: If today's deep dive into Foxconn's boardroom strategy has been useful to you — the way these conversations are ad-free is because of listener support. If you'd like to help keep this going, you can find us at buy me a coffee dot com slash fexingo. No pressure, just a simple way to keep the show independent. Luna: Yeah, and it genuinely makes a difference. Now, back to that 2010 crisis — what did the board actually do? Lucas: The board implemented what they called the 'Love and Care' project — they installed safety nets around all dormitory buildings, hired thousands of counselors, and raised wages significantly. But the deeper shift was a board-level decision to accelerate automation. Terry Gou publicly stated they would deploy 1 million robots within three years. That didn't fully materialize, but the direction was set: reduce dependence on human labor for the most repetitive tasks. Luna: So the board turned a reputational crisis into a push for operational efficiency. Lucas: Exactly. And that automation push has continued. Today Foxconn runs what they call 'lights-out' factories — in certain production lines for server motherboards and iPhones, the lights can be off because there are no humans working. The board sees automation not just as a cost saver but as a way to manage labor volatility, especially as wages in China have risen. Luna: And that's tied to the diversification strategy too, I assume. Lucas: Absolutely. The board's biggest challenge right now is reducing reliance on Apple without losing the Apple business. They've made three big bets: electric vehicles, semiconductors, and AI servers. In 2021, the board approved the purchase of a former General Motors plant in Lordstown, Ohio, to build EV components. They also acquired Sharp in 2016 for about $3.5 billion — partly to get display technology, partly to build a consumer brand. Luna: The EV pivot is interesting because it's a completely different manufacturing challenge than phones. Lucas: Right. The board created a subsidiary called Foxtron to build EVs, and they've partnered with companies like Stellantis and Fisker. The strategy is to be the open platform — the Android of EVs, if you will — offering manufacturing services to any automaker. But it's early. In 2025, EV revenue was still less than 5 percent of total sales. Luna: And the AI server business — that's where Nvidia comes in. Lucas: That's actually been the brightest spot. Foxconn's board approved a major investment in AI server assembly in 2023, and by late 2025 they were producing about a third of Nvidia's H100 and Blackwell servers. The margins are better — maybe 10 percent gross — because these are complex, high-value systems. And importantly, this business isn't dependent on Apple. Luna: So the board is essentially trying to replicate the Apple playbook — be the go-to manufacturer for the world's most demanding tech company — but now for AI. Lucas: Exactly. And the board's structure has enabled this flexibility. Foxconn is still controlled by Terry Gou's family — he stepped down as chairman in 2019 but remains influential. The current chairman, Liu Young-way, was a longtime deputy. The board is composed mostly of senior executives and family members, not independent directors. That concentration of power allows fast decisions — the board approved the Zhengzhou campus expansion in weeks, not months. Luna: But it also means less oversight. The 2010 suicide crisis arguably happened because the board wasn't paying enough attention to labor conditions. And the customer concentration risk was a deliberate choice. Lucas: That's the key tension. The same board structure that enables breakneck speed also creates blind spots. In 2024, a Wall Street Journal investigation revealed that Foxconn had been using illegal student overtime at the Zhengzhou plant during iPhone 15 production. The board's response was to fire a few managers and issue a statement, but critics say the system incentivizes pushing workers because the margins are so thin. Luna: And yet Apple keeps coming back. Why? Because Foxconn can do what no other manufacturer can: deliver 100 million units per quarter with near-zero defects. Lucas: That's the paradox of Foxconn. The board has built something incredible — a manufacturing machine that has never failed to meet Apple's production schedule. But it's built on a model that, by design, runs on ultra-low margins and ultra-high labor intensity. The question for the board now is whether they can transition to higher-value manufacturing — EVs, AI servers — before the old model becomes unsustainable. Luna: So the next few years will be the real test. Can Foxconn's board pull off a transformation while still servicing the Apple behemoth? Lucas: That's exactly the question. And we'll be watching closely.