Foxconn Midea

Foxconn

Foxconn in China, Taiwan Province, known as the Hon Hai Technology Group. In 1988，investment in mainland China, is specialized in producing 8C products and semiconductor equipment of the high-tech group (the world's largest OEM manufacturers), also the world's largest electronics professional manufacturers, with more than 120 million employees and the world's top IT customer base(Foxconn.com). Foxconn has been a successful model for long time by hiring China's low-paid and hard work labor to produce products for top customers such as Apple and Nokia. However, recently in the coastal areas of China, the shortage of labor makes Foxconn face a substantial increase in labor costs. In 2011, Foxconn announced that they're planning on buying one million robots to replace human worker in three years (BBC 2014). However, after keeping silence for long time recently announced that Its Chinese factories, including those in Shenzhen, are already filled with over 50,000 fully operational industrial robots, and also hundreds of thousands of other pieces of automated equipment.

For the nine months ended 30 September 2016, Foxconn Technology Co Ltd revenues decreased 20% to NT$58.89B(Thomson One 2016). Low ROE and NPM since 2014 and ROE trend to decrease in next two years. Those give us a negative overview of Foxconn’s Financial position. Moreover, this company owns huge substantial debts, which may adversely affect its operations. During FY2014, Foxconn reported total debt of 12.4 billion Taiwan Dollar, a YoY increase of 82.1%(Foxconn annual report). Its ability to get extra financing for strategic initiatives in future will be strained by the noteworthy increment in debt, which may further weaken its financial position.

Apart from Foxconn’s financial instability and Substantial debts issue, this company also be rejected for it’s unsatisfied Ethical aspect, no matter suicide and riots cases in early years or the recent news that they decide to replacing up to 60000 factory worker s with robots, all confirm that Foxconn do not attach importance to human rights of employees（BBC 2016）. Although this is the robot industry brought about by the inevitable conflict, but Foxconn have no action or even increased its severity, which definitely against our client’s concern of labour rights.

MIDEA

Overview of Business 

Midea is a leading global provider of consumer appliances and HVAC systems, offering a wide range of products including air conditioners, refrigerators, washing machines, kitchen appliances, and various small home appliances. Midea focuses on continuous technological innovation to improve the quality of products and services, making life more comfortable and better. Midea is a private enterprise listed on the Shenzhen Stock Exchange (000333), its diversified share structure shows that nearly 20% of the shares held by international institutional investors(midea.com). In 2015, Midea entered the Forbes Global 500. The same year, China Fortune 500 list, Midea ranked 32, ranking first in the home appliance industry (Bloomberg 2016).

Strategy

From the "smart housekeeper" to "M-Smart home strategy"; from cooperation with Xiaomi to complete the smart hardware company transition to a joint venture with the Yaskawa robot industry, the Midea in the smart home, intelligent manufacturing and the "user" based on the depth of customization is a step by step to open its "deep intelligence" strategy blueprint (Midea annual report 2015). And its robot industry's important goal is to implement the “double intellectual “(Smart Home & Intelligent Manufacturing strategy). August 5, 2015, Midea joint venture with Yasukawa, strategic march into the robot industry, accelerate the transformation of intelligent hardware company. The two sides jointly set up service robots and industrial robots two joint ventures. Service robots instead of housework, old-age welfare; industrial robots will enter the production line to improve factory efficiency. The company's overall offer to acquire shares of KUKA Group, the final acceptance of the offer ratio of 81.04% shares, plus with the 13.51% superimposed before, the company will acquire the completion of the acquisition of 94.55% of the shares of KUKA Group (Jeffrey et al 2016). Upon completion of the acquisition of KUKA, KUKA will promote the company's strategy of "double intellectual", enhance its production efficiency, upgrade its manufacturing capacity, and upgrade its products with the help of KUKA's technological advantages in industrial robots and automated production. The company can also cooperate with the KUKA Group to explore the vast Chinese robot market.

By 2015 inventory and cool summer effect, resulting in overall revenue decline this year which lead to a slightly decrease in ROE. However still impressive compare to market average of 13.2%(Thomson one)，While midea actively introduced new products, small household electrical appliance sector to maintain a relatively high growth, enhancing this company's profitability. Meanwhile，In this year's acquisition of Toshiba and consolidated financial statements, the Toshiba home appliances in the Q3 to achieve profitability, increase the company's return to the mother net profit of 19.7 million yuan (Yuanta 2016). Midea's net profit remained around 20% growth rate during past last year（yahoo 2016）. During 2016 Chinese new year, cold climate boost reduction of inventory, under the joint action of hot summer and the boost real estate, the inventory has been continuously clean. Since the base period is low, will enable the company to continue rapid recovery Q4 performance.