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EV startup Fisker sets moonshot goal of making a climate-neutral EV by 2027
Electric vehicle startup Fisker Inc. has set a moonshot goal of creating its first climate-neutral car by 2027.
Fisker has yet to bring a vehicle to market — climate neutral or not — making this an ambitious target. The all-electric Fisker Ocean SUV, which is still on track to go into production in November 2022, will not be climate neutral, according to CEO Henrik Fisker, who laid out the target as part of a broader update Tuesday to investors. Instead, this will be another yet to be announced vehicle.
Henrik Fisker, a serial entrepreneur who rose to fame as the designer behind iconic vehicles like the Aston Martin V8 Vantage, the production launch design of the Aston Martin DB9 and the BMW Z8 roadster, also provided a few other updates during the investor call. He said the Ocean will have an anticipated range of up to 350 miles, beyond the previously estimated 300 miles. The company has received more than 14,000 reservations for the Ocean as of March, according to an annual report distributed to shareholders.
Fisker, which went public via a merger with special purpose acquisition company Apollo Global Management Inc. in October at a valuation of $2.9 billion, aims to have four vehicles to market by 2025. One of those, Fisker hinted at Tuesday, could be a luxury vehicle which he called the “UFO” that will use the company’s FM29 platform architecture.
Fisker’s carbon-neutral plan
Other companies across industries have made promises to hit that carbon-neutral goal before. Henrik Fisker emphasized to investors that the company will not purchase carbon offsets to accomplish that climate-neutrality goal. Carbon offsets are credits that companies can purchase to “claim” a reduction in CO2 toward their project or product. Instead, Fisker said they will work with suppliers to develop climate-neutral materials and manufacturing processes.
The company lays out some of its proposed strategies on its website, where it splits the vehicle lifecycle into five phases: upstream sourcing, manufacturing and assembly, logistics, the use phase and end-of-life. For each phase, the company lists a few bullet points, such as localizing manufacturing. Even with these plans, achieving climate neutrality in vehicle production will be extremely difficult. Vehicles use materials and components such as steel that are notoriously hard to decarbonize, for example.
Fisker said that the company’s manufacturing partners have climate-neutral goals of their own, which is true for automotive contract manufacturer Magna Steyr. The company inked a deal with Fisker to exclusively manufacturer the Fisker Ocean in Europe. Magna set a target of climate neutrality for its European operations by 2025 and globally by 2030. Foxconn, Fisker’s other major partner for its second, lower-price vehicle dubbed Project PEAR, also has a net-zero emissions goal, but it is set for the middle of the century.
Moonshot goals such as this one could help push innovation in manufacturing processes and encourage other automakers and suppliers to reach for the same targets. Other automakers such as Polestar and Porsche have all made carbon-neutral promises with deadlines of 2030, while Mercedes has said it will hit that target in 2039.
Fisker does seem to have a plan for how it might be able to recycle or reuse some of its EV batteries once they’re no longer useful in the vehicle. The company plans to extend its leasing program across the entire estimated 15-year lifespan of the vehicle, which would theoretically ensure that Fisker will be in possession of a number of its vehicles when they reach end-of-life.
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Light Phone’s founders discuss life beyond the smartphone
For a seemingly tough pitch, Light has had little trouble getting noticed. The company has run two successful crowdfunding campaigns for a pair of minimalist phones designed to augment or replace the smartphone. Today the startup announced that it will be shipping the second version of the handset, which introduces a handful of features back into the product, like texting.
Ahead of the launch, we spoke to Light’s founders, Kaiwei Tang and Joe Hollier, about funding, feature glut and the future of the handset.
How it all began
Brian Heater: The project essentially started as an in-house at Google, is that correct?
Kaiwei Tang: We met in 2014 in Google’s incubator called 30 Weeks. That’s where we met and started talking about Light Phone eventually.
Joe Hollier: 30 Weeks program was an experiment that came out of the Google creative lab, and their hypothesis was that if given the right resources, guidance, designers might be able to create new creative startups, and that designers should be on the founding table of companies.
So their hypothesis was that we as designers would be able to imagine a new startup in the software application space, and then through designing the end product, which is how the Google creative lab works, we’d be able to inspire the engineers and investors that we would need to make the product a reality.
Brian: What did you see in the market that wasn’t being fulfilled by countless different smartphone companies?
Joe: People were feeling overwhelmed by their smartphone and craving some escape, and we didn’t really see an escape.
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Light’s new minimalist phone is available now for $350
There’s that pesky catch-22 you’ve got to get out of the way when discussing the Light Phone and its successor. There’s an inherent irony to a piece of technology created with the express purpose of weaning us off technology. But it’s 2019, and inherent irony is kind of the name of the game.
Light certainly has its share of supporters. As the company announces that it has both begun shipping the Light Phone II to Indiegogo backers and made the product more directly available through its site at $350 (via pre-order), it’s also revealing its funding for the first time. As of this writing, the company has raised $12.3 million.
The crowdfunding parts we knew about, of course. The original phone raised a solid $400,000 on Kickstarter. The Indiegogo campaign for the second version blew that out of the water at $3.5 million with an emphasis on pre-orders. Turns out VCs are getting in on the action, as well, with $8.4 million raised in seed. Hinge Capital, Bullish, White Bay Group, Able Partners, Product Co-Op and HAX have all chipped in, but the leader is the most interesting of the bunch.
Foxconn is the biggest investor of the bunch. The manufacturing giant, naturally, is also helping the company build the handsets and scale things as Light looks toward retail channels beyond its current online offering.
“They’ve been building smart phones for 20, 30 years,” co-founder Kaiwei Tang told TechCrunch. “When we came to them with the first Light Phone, it was just a simplified, voice-only device. Right after the pitch, I was talking to the sales VP who said, ‘hey Kai, I need Light Phone right now. Smartphone has ruined my life. My kids don’t talk to me.’ ”
A number of other high-profile angel investors were equally taken with the notion of a simplified device that could deliver core functionality while weaning users off of smartphone dependence. John Zimmer (Lyft), Michael Mignano and Nir Zicherman (Anchor), Tim Kendall (Moment) and Scott Belsky (Adobe) have all invested, as well.
Like the original Light Phone, the new version presents a sort of built-in paradox for its creators. If the underlying idea is stripping non-core functionality, isn’t introducing a second version with new features somewhat counter-productive?
The new model will get ridesharing (partner to be announced), music playback (likely via on-board storage for starters), turn-by-turn direction and find my phone features. Among other things, the functionality of those features will be limited by the E Ink display. The phone also finds the company making the jump from 2G to LTE. Users can pop in a SIM from AT&T, Verizon or T-Mobile.
“To use an analogy, we’re offering a beautifully designed screwdriver that does one thing well,” says Tang. “Obviously, the Light Phone being an E Ink screen and small size limits it to the users. We don’t encourage people to play videos, or watch video on it. But making a phone call, getting a taxi, listening to music (yes, there’s a headphone jack), recording a voice memo. Maybe down the road they have a calendar reminder, those are the simple tools; it has a clear goal.”
The Light Phone II is probably the least pretty device I’ve reviewed for this site. It’s small, but chunky, like a shrunken e-reader with a screen too small to actually use for e-books. It’s got just enough functionality to (hopefully) free you of your smartphone for hours at a time.
Light says it has sold “tens of thousands” of units. It shipped 15,000 of the first generation and somehow has in the neighborhood of 40,000 reservations it hasn’t filled for the device. The company is looking to push those users toward the Light Phone 2. That device, meanwhile, has around 10,000 pre-orders at present.
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Startups Weekly: SoftBank’s second act
Hello and welcome back to Startups Weekly, a weekend newsletter that dives into the week’s noteworthy startups and venture capital news. Before I jump into today’s topic, let’s catch up a bit. Last week, I noted some challenges plaguing mental health tech startups. Before that, I wrote about Zoom and Superhuman’s PR disasters.
Remember, you can send me tips, suggestions and feedback to kate.clark@techcrunch.com or on Twitter @KateClarkTweets. If you don’t subscribe to Startups Weekly yet, you can do that here.
Anyway, onto the subject on everyone’s mind this week: SoftBank’s second Vision Fund.
Well into the evening on Thursday, SoftBank announced a target of $108 billion for the Vision Fund 2. Yes, you read that correctly, $108 billion. SoftBank indeed plans to raise even more capital for its sophomore vehicle than it did for the record-breaking debut vision fund of $98 billion, which was majority-backed by the government funds of Saudi Arabia and Abu Dhabi, as well as Apple, Foxconn and several other limited partners.
Its upcoming fund, to which SoftBank itself has committed $38 billion, has attracted investment from the National Investment Corporation of National Bank of Kazakhstan, Apple, Foxconn, Goldman Sachs, Microsoft and more. Microsoft, a new LP for SoftBank, reportedly hopped on board with the Japanese telecom giant as part of a grand scheme to convince the massive fund’s portfolio companies to transition to Microsoft Azure, the company’s cloud platform that competes with Amazon Web Services . Here’s more on that and some analysis from TechCrunch editor Jonathan Shieber.
News of the second Vision Fund comes as somewhat of a surprise. We’d heard SoftBank was having some trouble landing commitments for the effort. Why? Well, because SoftBank’s investments have included a wide-range of upstarts, including some uncertain bets. Brandless, a company into which SoftBank injected a lot of money, has struggled in recent months, for example. Wag is said to be going downhill fast. And WeWork, backed with billions from SoftBank, still has a lot to prove.
Here’s everything else we know about The Vision Fund 2:
- It’s focused on the “AI revolution through investment in market-leading, tech-enabled growth companies.”
- The full list of investors also includes seven Japanese financial institutions: Mizuho Bank, Sumitomo Mitsui Banking Corporation, MUFG Bank, The Dai-ichi Life Insurance Company, Sumitomo Mitsui Trust Bank, SMBC Nikko Securities and Daiwa Securities Group. Also, international banking services provider Standard Chartered Bank, as well as “major participants from Taiwan.”
- The $108 billion figure is based on memoranda of understandings (MOUs), or agreements for future investment from the aforementioned entities. That means SoftBank hasn’t yet collected all this capital, aside from the $38 billion it plans to invest itself in the new Vision Fund.
- Saudi and Abu Dhabi sovereign wealth funds are not listed as investors in the new fund.
- SoftBank is expected to begin deploying capital fund from Fund 2 immediately, and a first close is expected in two months, per The Financial Times.
- We’ll keep you updated on the Vision Fund 2’s investments, fundraising efforts and more as we learn about them.
On to other news…
WeWork is planning a September listing
The company made headlines again this week after word slipped it was accelerating its IPO plans and targeting a September listing. We don’t know much about its IPO plans yet as we are still waiting on the co-working business to unveil its S-1 filing. Whether WeWork can match or exceed its current private market valuation of $47 billion is unlikely. I expect it will pull an Uber and struggle, for quite some time, to earn a market cap larger than what VCs imagined it was worth months earlier.
The consumer financial app made headlines twice this week. The first time because it raised a whopping $323 million at a $7.6 billion valuation. That is a whole lot of money for a business that just raised a similarly sized monster round one year ago. In fact, it left us wondering, why the hell is Robinhood worth $7.6 billion? Then, in a major security faux pas, the company revealed it has been storing user passwords in plaintext. So, go change your Robinhood password and don’t trust any business to value your security. Sigh.
Another day, another huge fintech round
While we’re on the subject on fintech, TechCrunch editor Danny Crichton noted this week the rise of mega-rounds in the fintech space. This week, it was personalized banking app MoneyLion, which raised $100 million at a near unicorn valuation. Last week, it was N26, which raised another $170 million on top of its $300 million round earlier this year. Brex raised another $100 million last month on top of its $125 million Series C from late last year. Meanwhile, companies like payments platform Stripe, savings and investment platform Raisin, traveler lender Uplift, mortgage backers Blend and Better and savings depositor Acorns have also raised massive new rounds this year. Naturally, VC investment in fintech is poised to reach record levels this year, according to PitchBook.
Arianna Huffington, the CEO of Thrive Global, stepped down from Uber’s board of directors this week, a team she had been apart of since 2016. She addressed the news in a tweet, explaining that there were no disagreements between her and the company, rather, she was busy and had other things to focus on. Fair. Benchmark’s Matt Cohler also stepped down from the board this week, which leads us to believe the ride-hailing giant’s advisors are in a period of transition. If you remember, Uber’s first employee and longtime board member Ryan Graves stepped down from the board in May, just after the company’s IPO.
Today I told my fellow @Uber board members that given @Thrive‘s growth, I will no longer be able to give my board duties the attention they deserve, so I will be stepping down. I look forward to watching Uber go from strength to strength! Here is the email I sent to the board: pic.twitter.com/sck0CPLwAV
— Arianna Huffington (@ariannahuff) July 24, 2019
Unity, now valued at $6B, raising up to $525M
Bird is raising a Sequoia-led Series D at $2.5B valuation
SMB payroll startup Gusto raises $200M Series D
Elon Musk’s Boring Company snags $120M
a16z values camping business HipCamp at $127M
An inside look at the startup behind Ashton Kutcher’s weird tweets
Dataplor raises $2M to digitize small businesses in Latin America
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If you enjoy this newsletter, be sure to check out TechCrunch’s venture-focused podcast, Equity. In this week’s episode, available here, Equity co-host Alex Wilhelm, TechCrunch editor Danny Crichton and I unpack Robinhood’s valuation and argue about scooter startups. Equity drops every Friday at 6:00 am PT, so subscribe to us on Apple Podcasts, Overcast and Spotify.
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Foxconn pulls back on its $10 billion factory commitment
Well that didn’t last long.
In 2017, Foxconn announced the largest investment of a foreign company in the United States when it selected Mount Pleasant, Wisconsin for a new manufacturing facility. Buttressed by huge economic development grants from Wisconsin, an endorsement from President Trump, and Foxconn CEO Terry Gou’s vision of a maker America, the plant was designed to turn a small town and its environs into the futuristic “Wisconn Valley.”
Now, those dreams are coming apart faster than you can say “Made in America.”
In an interview with Reuters, a special assistant to Gou says that those plans are being remarkably scaled back. Originally designed to be an advanced LCD factory, the new Foxconn facility will instead be a much more modest (but still needed!) research center for engineers.
It’s a huge loss for Wisconsin, but the greater shock may be just how obvious all of this was. I wrote about the boondoggle just a few weeks ago, as had Bruce Murphy at The Verge a few weeks before that. Sruthi Pinnamaneni produced an excellent podcast on Reply All about how much the economic development of Mount Pleasant tore the small town asunder.
The story in short: the economics of the factory never made sense, and economics was always going to win over the hopes and dreams of politicians like Wisconsin governor Scott Walker, who championed the deal. Despite bells and whistles, televisions are a commodity product (unlike, say, airfoils), and thus the cost structure is much more compatible with efficient Asian supply chains than with American expensive labor.
Yet, that wasn’t the only part of the project that never made any sense. Foxconn was building in what was essentially the middle of nowhere, without the sort of dense ecosystem of suppliers and sub-suppliers required for making a major factory hum. (Plus, as a native of Minnesota, I can also attest that Wisconsin is a pile of garbage).
Those suppliers are everything for manufacturers. Just this past weekend, Jack Nicas at the New York Times observed that Apple’s advanced manufacturing facility in Austin, Texas struggled to find the right parts it needed to assemble its top-of-the-line computer, the Mac Pro:
But when Apple began making the $3,000 computer in Austin, Tex., it struggled to find enough screws, according to three people who worked on the project and spoke on the condition of anonymity because of confidentiality agreements.
In China, Apple relied on factories that can produce vast quantities of custom screws on short notice. In Texas, where they say everything is bigger, it turned out the screw suppliers were not.
There are of course huge manufacturing ecosystems in the United States — everything from cars in Detroit, to planes in Washington, to advanced medical devices in several major bio-hubs. But consumer electronics is one that has for the most part been lost to Singapore, Taiwan, Korea, and of course, China.
Geopolitically, Foxconn’s factory made a modicum of sense. With the increasing protectionism emanating from Western capitals, Foxconn could have used some geographical diversity in the event of a tariff fight. The company is Taiwanese, but manufacturers many of its products on the mainland.
And of course, a research center is still an enormous gain for a region of Wisconsin that could absolutely use high-income, professional jobs. Maybe the process of rolling out a next-generation manufacturing ecosystem will take more time than originally anticipated, but nothing is stopping further expansion in the future.
Yet, one can’t help but gaze at the remarkable naïveté of Wisconsin politicians who offered billions only to find that even massive subsidies aren’t enough. It’s a competitive world out there, and the United States has little experience in these fights.
India may put friction on foreign firms to protect domestic startups
Indian Prime Minister Narendra Modi. (MONEY SHARMA/AFP/Getty Images)
One of the major battles for tech supremacy is over the future of the Indian IT market, which is rapidly bringing more than a billion people onto the internet and giving them robust software services. I’ve talked a bit about data sovereignty, which mandates that Indian data be stored in Indian data centers by Indian companies, pushing out foreign companies like Amazon, Google, and Alibaba.
Now, it looks like India is taking a page from the Asian tiger-school of development, and is going to increasingly favor domestic firms over foreign ones in key industries. Newley Purnell and Rajesh Roy report in the WSJ:
The secretary of India’s Telecommunications Department, Aruna Sundararajan, last week told a gathering of Indian startups in a closed-door meeting in the tech hub of Bangalore that the government will introduce a “national champion” policy “very soon” to encourage the rise of Indian companies, according to a person familiar with the matter. She said Indian policy makers had noted the success of China’s internet giants, Alibaba Group Holding Ltd. and Tencent Holdings Ltd. , the person said. She didn’t immediately respond to a request for more details on the program or its timing.
The idea of national champions is simple. Unlike the innovation world of Silicon Valley, there are obvious sectors in an economy that need to be fulfilled. Food and clothes have to be sold, deliveries made, all kinds of industrial goods need to be built. Rather than creating a competitive market that requires high levels of duplicate capital investment, the government can designate a few companies to take the lead in each market to ensure that they can invest for growth rather than in, say, marketing costs.
If done well, such policies can rapidly industrialize a country’s economic base. When done poorly, the lack of competition can create lethargy among entrepreneurs, who have already won their markets without even trying.
The linchpin is whether the government pushes companies to excel and sets aggressive growth targets. In Korea and China, the central governments actively monitored corporate growth during their catch-up years, and transferred businesses to new entrepreneurs if business leaders failed to perform. Can India push its companies as hard without market forces?
As the technology industry matures in the West, entrepreneurs will look for overseas as their future growth hubs. The challenge is whether they will be let in at all.
Video game geopolitics
Nexon’s MapleStory2 game is one of its most profitable (Screenshot from Nexon) .
Korea and Japan are two of the epicenters of the video game industry, and now one of its top companies is on the auction block, raising tough questions about media ownership.
Nexon founder Kim Jung Ju announced a few weeks ago that he was intending to sell all of his controlling $9 billion stake in the leading video game company. The company has since executed something of a multi-stage auction process to determine who should buy those shares. One leading candidate we’ve learned is Kakao, the leading internet portal and chatting app in Korea.
The other leading candidate is China-based Tencent, which owns exclusive distribution rights in China of some of Nexon’s most important titles.
Tencent has been increasingly under the sway of China’s government, which froze video game licensing last year as it worked to increase content regulation over the industry. Now the question is whether it will be politically palatable to sell a leading star of Korea’s video game industry to its economic rival.
Mr Wi added that Nexon would be an attractive target for Tencent, which pays about Won1tn in annual royalties to the South Korean game developer. But selling the company to Tencent would be “politically burdensome” for Mr Kim, given unfavourable public opinion in South Korea towards such a sale, he cautioned.
“Political risks are high for the deal. Being criticised for selling the company to a foreign rival, especially a Chinese one, would be the last thing that Mr Kim wants,” said Mr Wi.
Such concerns around Chinese media ownership have become acute throughout the world, but we haven’t seen these concerns as much in the video game industry. Clearly, times have changed.
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Share your feedback on your startup’s attorney
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What’s Next
- More work on societal resilience
This newsletter is written with the assistance of Arman Tabatabai from New York
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Apple could end up manufacturing iPhones in another country due to tariffs
According to a new report from Bloomberg, Apple is thinking about multiple scenarios when it comes to tariffs and iPhone production. Right now, iPhones are not affected directly by the trade war between China and the U.S.
But if U.S. President Donald Trump decides to raise tariffs on smartphones, it could be a big deal for the company. Apple manufactures most of its iPhones in China right now, and works with Foxconn for the final assembly of those devices.
In some countries with high tariffs, Apple has worked with suppliers outside of China. For instance, Taiwanese manufacturer Wistron has built an assembly facility in Bengaluru, India. At first, the plan was to manufacture iPhone SE devices in India.
Similarly, Foxconn opened a facility in Brazil back in 2011. But results have been disappointing as devices were still much more expensive in Brazil than in the U.S.
But the U.S. is such a key market for Apple that tariffs on U.S. imports could have significant consequences. According to Bloomberg, Apple would keep the same supply chain even if the U.S. decides on a 10 percent tariff on smartphones. If might move production away from China with a 25 percent tariff.
It’s unclear if all production would move to another country or just production for the U.S. But nothing is changing for now. It’s just executives playing a little game of “what if.”
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Foxconn or Foxgone? Tariffs, Wisconsin and iPhone fires
First some notes on SoftBank’s rumored expansion into China and its weird fund math, then Foxconn and then quick notes on tech depression, Huawei and more.
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SoftBank has fund visions (and a Vision Fund) for China? That, and more money
Kane Wu at Reuters reported overnight that SoftBank is looking to open an office and hire an investment team in China, which Wu says will be based in Shanghai. That’s following the fund’s recent global expansion with new targeted offices in Saudi Arabia and India.
When I saw this, I sort of did a double-take: SoftBank doesn’t have a presence in China? The fund has reportedly been seeking investments in some of China’s leading unicorn stars, including controversial face recognition startup SenseTime, and leading edtech startup Zuoyebang (作业帮, which literally translates as “school assignment help”). (Hat-tips to Selina Wang at Bloomberg, who seems to just be sitting in Vision Fund partner meetings). And of course, it dumped a pretty penny into WeWork China, where it was part of a $500 million syndicate, and is a huge investor in Didi.
It’s sort of obvious that SoftBank would expand to China. What will be interesting though is to see how the fund structures itself long-term. As far as I know, the Vision Fund is a singular “fund” that invests worldwide (send me an email if I am wrong on this count). China has a thicket of regulations on funds and companies, which is one of several reasons we see specifically China-focused vehicles (such as Lightspeed and Lightspeed China or Sequoia and Sequoia China). If the Vision Fund continues to be a unified fund, that would be a notable strategy shift that might be cloned by other trans-Pacific funds.
Aside: SoftBank Vision Fund math is complicated
Rajeev Misra, board director of SoftBank Group and CEO of SoftBank Investment Advisors. Photo by Drew Angerer/Getty Images.
When it first closed the Vision Fund, SoftBank explained they had raised just over $93 billion in committed capital or, more precisely, around $93.15-$93.2 billion, according to the initial investor presentations and its annual Form D filings. In those docs, SoftBank said that the fund was financed with $28 billion from SoftBank and $65 billion from third-party investors.
On top of the $93 billion raised for the Vision Fund, SoftBank detailed that it had committed $4.5 billion of its own capital to a separate “Delta Fund,” which was used to alleviate conflicts around SoftBank’s Didi investment. Thus, SoftBank’s total VC funding aggregates to around $97.7 billion.
To add a complication, SoftBank later shifted $1.6 billion of the Vision Fund’s previously disclosed $65 billion in third-party capital over to the Delta Fund. In current disclosures, SoftBank shows $91.7 billion of committed capital for the Vision Fund ($28.1 billion from SoftBank and $63.6 billion from third-party investors). For the Delta Fund, SoftBank shows $6 billion in committed capital ($4.5 billion SoftBank contribution and $1.6 billion from third-party investors).
Here is where it gets even more complicated. In its latest filings, SoftBank also notes that it completed the interim closing of an additional $5 billion for the Vision Fund in mid-October, “intended for the installment of an incentive scheme for operations of SoftBank Vision Fund.” That additional cash would bring Vision Fund’s total committed capital to $96.7 billion, and $102.7 billion together with the Delta Fund.
While it wouldn’t be included in the committed equity capital total, SoftBank is also rumored to be raising a $4 billion credit facility to help finance additional acquisitions.
So, it’s probably best to say that the Vision Fund — as constituted right now — is $97 billion or $96.7 billion with precision, assuming this $5 billion reaches a final close.
SoftBank IPO
We have, of course, covered SoftBank quite obsessively, particularly its debt situation (Part 1, Part 2, Part 3, Part 4 and Part 5). What we haven’t covered more recently are the latest developments in SoftBank’s IPO, which is slated for December 19th and expected to bring in a haul of $21 billion. More to come on that front in the coming days.
Foxconn or Foxgone?
U.S. President Donald Trump and Foxconn Chairman Terry Gou. BRENDAN SMIALOWSKI/AFP/Getty Images
The South China Morning Post reported yesterday that Foxconn is investigating expanding its factories to Vietnam in order to avoid tariffs. Makes sense, and I have some calls this week and next trying to suss out how much hardware supply chains have really changed in response to the trade conflict.
That decision though isn’t just about the trade conflict, but also about the quickly increasing wages of Chinese laborers, as well as political interference from Beijing. The Trump administration’s trade policies are just the excuse Foxconn needs to (at least partially) extricate itself from China, while saving face in the process.
What’s interesting is that Foxconn is also dealing with a massive brush fire in Wisconsin, where it received one of the largest economic development incentives ever offered by an American government, a whopping $3 billion package that was expected to drive manufacturing employment in the state.
Overnight, Republicans in the state legislature passed a bill that would place large restrictions on incoming Democratic governor Tony Evers. Jessie Opoien for the (Madison) Cap Times:
Under the bill, legislators would have increased influence over the Wisconsin Economic Development Corporation, and the WEDC board, not the governor, would appoint the job creation agency’s CEO. However, the governor’s power to appoint a CEO would be restored in September 2019.
That is the agency that provided the Foxconn funding, which has become a political football in Wisconsin politics. Republicans are trying to protect one of the major economic legacies of outgoing governor Scott Walker, as well as what they believe is the future direction of manufacturing work in the state. Democrats smell a boondoggle in the making.
If that wasn’t all, rumored skimpy sales for iPhones is putting enormous pressure on Foxconn’s bottom line. Debby Wu at Bloomberg reported two weeks ago that:
The contract manufacturer aims to cut 20 billion yuan ($2.9 billion) from expenses in 2019 as it faces “a very difficult and competitive year,” according to an internal document obtained by Bloomberg. The company’s spending in the past 12 months is about NT$206 billion ($6.7 billion).
Foxconn is a very dynamic organization that has weathered repeated crises over the years. It is pretty much unique in what it does today: very few other companies can scale up and down hundreds of thousands of workers to meet iPhone and other device demands with such alacrity.
But, the fundamentals of the mobile device market have apparently changed dramatically this year, and Foxconn is likely to be the company most harmed as the assembler of those devices. That could destroy not just the Chinese dream of leading in manufacturing, but also the Vietnam and Wisconsin dreams as well.
Also: If you haven’t read it, this poetry by a Foxconn worker who committed suicide really resonated with me. Foxconn’s suicide problem is well-documented, but we often don’t hear from the individuals themselves.
Quick bites
Which big tech companies are most depressed?
Blind, the anonymous enterprise chatting app that has taken the tech world by storm, published survey results asking tech employees “I believe I am depressed.” Roughly 40 percent of employees responded yes. Interestingly, there wasn’t too much variation between companies. Amazon had the highest rate at 43 percent and Apple had the lowest rate at 30 percent. It’s an informal survey, probably without high scientific validation, but it is a reminder for all of us in the community that mental health and burnout is very real in the startup and tech ecosystems and we should be vigilant in helping each other when times are rough.
More bad news for Huawei as British Telecom bans its equipment
This is one of those stories that we are just going to keep hearing about. After bans in Australia and New Zealand, British Telecom has announced they will not just ban Huawei’s 5G equipment, but also its 3G and 4G equipment. Britain, like Aus/NZ, Canada and the U.S., is part of the Five Eyes intelligence network, and national security officials have been leading the crusade against Huawei infrastructure. What’s interesting is not just the rapidity of the bans, but also that the bans haven’t (from what I have seen) migrated outside the Five Eyes community yet.
Pendo commits to hometown of Raleigh
Raleigh skyline. Photo by James Willamor used under Creative Commons via Flickr.
Pendo is a digital product management platform that has had quite a bit of success with customers and has raised more than $100 million in VC funding, most recently a Series D from Sapphire. The company announced that they have received a grant from home state North Carolina’s economic development department to grow in the Raleigh region. Pendo is committing $34.5 million to its headquarters (with the potential of creating 590 jobs), while the state will offer around $8.8 million in potential reimbursements over the next 12 years.
Given what I wrote yesterday about Wes McKinney leaving NYC and heading to Nashville and the work Chattanooga is doing to aid startups, it’s great to see other hotspots like Raleigh, NC invest to build out their ecosystems in a compelling way.
Todd Olson, CEO of Pendo, explained to me by email that, “Office rents in our downtown are a fraction of the cost of operating in other cities, and the cost of living is appealing to our employees. They can afford to buy a house here. In some markets around the country, that is becoming more difficult. It’s also just a nice place to live and work.”
Creative work is increasingly going to have to find a lower-cost home.
What’s next
I am still obsessing about next-gen semiconductors. If you have thoughts there, give me a ring: danny@techcrunch.com.
Thoughts on articles
The LP Anti-Portfolio – Great short read. Lindel Eakman, former managing director at UTIMCO, the University of Texas/Texas A&M endowment, gives a list of funds that he passed on that he now regrets. Unfortunately, this is pretty rare coming from an LP, albeit a former one. It would be great to get more public discussion on which funds were missed and why by LP investors.
Hopefully more reading time tomorrow.
Reading docket
What I’m reading (or at least, trying to read)
- Huge long list of articles on next-gen semiconductors. More to come shortly.
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How Silicon Valley should celebrate Labor Day
Ask any 25-year old engineer what Labor Day means to him or her, and you might get an answer like: it’s the surprise three-day weekend after a summer of vacationing. Or it’s the day everyone barbecues at Dolores Park. Or it’s the annual Tahoe trip where everyone gets to relive college.
Or simply, it’s the day we get off because we all work so hard.
And while founders and employees in startup land certainly work hard, wearing their 80-hour workweeks as a badge of honor, closing deals on conference calls in an air-conditioned WeWork is a far cry from the backbreaking working conditions of the 1880s, the era when Labor Day was born.
For everyone here in Silicon Valley, we should not be celebrating this holiday triumphantly over beers and hot dogs, complacent in the belief that our gravest labor issues are behind us, but instead use this holiday as a moment to reflect on how much further we have to go in making our workplaces and companies more equitable, diverse, inclusive and ethically responsible.
Bloody Beginnings
On September 5th, 1882, 10,000 workers gathered at a “monster labor festival” to protest the 12-hours per day, seven days a week harsh working conditions they faced in order to cobble together a survivable wage. Even children as “young as 5 or 6 toiled in mills, factories and mines across the country.”
This all erupted in a climax in 1894 when the American Railway Union went on a nationwide strike, crippling the nation’s transportation infrastructure, which included trains that delivered postal mail. President Grover Cleveland declared this a federal crime and sent in federal troops to break up the strike, which resulted in one of the bloodiest encounters in labor history, leaving 30 dead and countless injured.
Labor Day was declared a national holiday a few month later in an effort to mend wounds and make peace with a reeling and restless workforce (it also conveniently coincided with President Cleveland’s reelection bid).
The Battle is Not Yet Won
Today in Silicon Valley, this battle for fair working conditions and a living wage seems distant from our reality of nap rooms and lucrative stock grants. By all accounts, we have made tremendous strides on a number of critical labor issues. While working long hours is still a cause for concern, most of us can admit that we often voluntarily choose to work more than we have to. Our workplace environments are not perfect (i.e. our standing desks may not be perfectly ergonomic), but they are far from life-threatening or hazardous to our health. And while equal wages are still a concern, earning a living wage is not, particularly if the worst case scenario after “failing” at a startup means joining a tech titan and clocking in as a middle manager with a six-figure salary.
Even though the workplace challenges of today are not as grave as life or death, the fight is not yet over. Our workplaces are far from perfect, and the power dynamic between companies and employees is far from equal.
In tech, we face a myriad of issues that need grassroots, employee-driven movements to effect change. Each of the following issues has complexities and nuances that deserve an article of its own, but I’ve tried to summarize them briefly:
- Equal pay for equal work – while gender wage gaps are better in tech than other industries (4% average in tech vs. 20% average across other industries), the discrepancy in wages for women in technical roles is twice the average for other roles in tech.
- Diversity – research shows that diverse teams perform better, yet 76% of technical jobs are still held by men, and only 5% of tech workers are Black or Latino. The more alarming statistic in a recent Atlassian survey is that more than 40% of respondents felt that their company’s diversity programs needed no further improvement.
- Inclusion – an inclusive workplace should be a basic fundamental right, but harassment and discrimination still exist. A survey by Women Who Tech found that 53 percent of women working in tech companies reported experiencing harassment (most frequently in the form of sexism, offensive slurs, and sexual harassment) compared to 16 percent of men.
- Outsourced / 1099 employees – while corporate employees at companies like Amazon are enjoying the benefits of a ballooning stock, the reality is much bleaker for warehouse workers who are on the fringes of the corporate empire. A new book by undercover journalist James Bloodworth found that Amazon workers in a UK warehouse “use bottles instead of the actual toilet, which is located too far away.” A separate survey conducted found that 55% of these workers suffer from depression, and 80% said they would not work at Amazon again.Similarly, Foxconn is under fire once again for unfair pay practices, adding to the growing list of concerns including suicide, underage workers, and onsite accidents. The company is the largest electronics manufacturer in the world, and builds products for Amazon, Apple, and a host of other tech companies.
- Corporate Citizenship & Ethics – while Silicon Valley may be a bubble, the products created here are not. As we’ve seen with Facebook and the Cambridge Analytica breach, these products impact millions of lives. The general uncertainty and uneasiness around the implications of automation and AI also spark difficult conversations about job displacement for entire swaths of the global population (22.7M by 2025 in the US alone, according to Forrester).
Thus, the reversal in sentiment against Silicon Valley this past year is sending a message that should resonate loud and clear — the products we build and the industries we disrupt here in the Valley have real consequences for workers that need to be taken seriously.
Laboring toward a better future
To solve these problems, employees in Silicon Valley needs to find a way to organize. However, there are many reasons why traditional union structures may not be the answer.
The first is simply that traditional unions and tech don’t get along. Specifically, the AFL-CIO, one of the largest unions in America, has taken a hard stance against the libertarian ethos of the Valley, drawing a bright line dividing the tech elite from the working class. In a recent speech about how technology is changing work, the President of the AFL-CIO did not mince words when he said that the “events of the last few years should have made clear that the alternative to a just society is not the libertarian paradise of Silicon Valley billionaires. It is a racist and authoritarian nightmare.”
But perhaps the biggest difference between what an organized labor movement would look like in Silicon Valley and that of traditional organized labor is that it would be a fight not to advance the interest of the majority, but to protect the minority. In the 1880s, poor working conditions and substandard pay affected nearly everyone — men, women, and children. Unions were the vehicles of change for the majority.
But today, for the average male 25-year old engineer, promoting diversity and inclusion or speaking out about improper treatment of offshore employees is unlikely to affect his pay, desirability in the job market, or working conditions. He will still enjoy the privileges of being fawned over as a scarce resource in a competitive job market. But the person delivering the on-demand service he’s building won’t. His female coworker with an oppressive boss won’t. This is why it is ever more important that we wake up and not only become allies or partners, but champions of the causes that affect our less-privileged fellow coworkers, and the people that our companies and products touch.
So this Labor Day, enjoy your beer and hot dog, but take a moment to remember the individuals who fought and bled on this day to bring about a better workplace for all. And on Tuesday, be ready to challenge your coworkers on how we can continue that fight to build more diverse, inclusive, and ethically responsible companies for the future.
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Foxconn to plug at least $340M into AI R&D over five years
Manufacturing giant Foxconn has said it will make a major investment in artificial intelligence-based R&D as it looks for new business growth opportunities in a cooling global smartphone market, Nikkei reports. Andrew Ng’s Landing.ai wants to bring artificial intelligence to the manufacturing industry, starting with Foxconn
AI pioneer Andrew Ng is probably best known for his work on the Google Brain project and for leading Baidu’s AI group. After leaving Baidu earlier this year, it wasn’t quite clear what exactly Ng was up to, but today he announced the launch of Landing.ai, a new startup that focuses on bringing artificial intelligence to the manufacturing industry. Read More
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