In a recent development, Foxconn's parent company, Hon Hai Technology Group, announced a significant strategic move by partnering with Porotech, a global semiconductor innovation brand, to venture into the augmented reality (AR) smart glasses marketTheir plans are set to kick off with volume production of MicroLED wafers by the fourth quarter of 2025.

Porotech is notable for its GaN (Gallium Nitride) technology and its self-developed PoroGaN® technology platform, giving it a competitive edge within the AR microdisplay sectorThis collaboration may mark a pivot point not only for Foxconn but also for the broader AR market as it stands to reshape how AR devices are manufactured and utilized.

Importantly, Foxconn's entry into the AR market isn’t about directly competing in the branding of terminal products; rather, they seem intent on becoming a player in the supply chain, essentially adopting the identity of a "shovel seller" in this burgeoning field

This metaphor evokes the historical gold rush, where those selling shovels often profited more than the gold miners themselvesIt highlights a strategic decision to focus on technology development rather than brand competition in end-user markets.

Analysts argue that by advancing MicroLED technology, Foxconn could fortify its position within Apple's supply chain, paving the way for future products that integrate MicroLED technologyHowever, it's crucial to mention that they are not the only contenders interested in this 'shovel seller' roleOther players within Apple's supply ecosystem, like Goertek, are eyeing the same position, attempting to assert their influence.

While Foxconn has advanced technological capabilities, its presence in end-user branding is notably sparse, especially in the AR ecosystemConsequently, their cautious approach towards entering terminal markets becomes evident

The partnership with Porotech strongly indicates Foxconn's intention to focus on developing AR display solutions to promote global AR advancements.

Foxconn's depth in AR technology emanates from its early investment in artificial intelligence (AI) R&D and applicationThey have adeptly utilized machine learning algorithms to optimize production processes and accurately predict equipment failures—achievements that significantly enhance production efficiency and product qualityFor instance, with the aid of AI-driven visual inspection systems, Foxconn can quickly identify minute defects on electronic devices, which positively impacts product yield rates.

As technological evolution continues, Foxconn is set to construct the world’s largest Nvidia GB200 superchip manufacturing facility in Guadalajara, Mexico by 2024. The GB200 chip serves as a pivotal component of Nvidia's next-generation Blackwell computing platform, tailored for high-performance AI computation

This collaboration lays a strong hardware foundation for global AI applications, granting Foxconn a secure platform to delve deeper into AI advancements.

Despite these robust advancements in technology, Foxconn's brand-building efforts in end-user markets have faced challenges, particularly in the realm of LCD televisionsAccording to data from Lottu Technology, Foxconn's television ODM shipments in October 2024 totaled around 600,000 units, reflecting an 11.3% year-over-year declineAlthough November’s figures rebounded to approximately 700,000 units—a 5.3% increase year-on-year—this still placed them in a seventh position among competitors, predominantly tied to foreign brands like Sony and Sharp, indicating a lack of diversified clientele.

In other segments like electric vehicles, Foxconn has encountered setbacks as wellInitial partnerships with companies like BAIC and Geely did not yield successful outcomes, and their recent acquisition of Nissan shares has been hampered by various obstacles

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The competitive landscape in the global electric vehicle market has intensified, with domestic brands emerging rapidlyThis renders Foxconn's ambition to achieve its "3+3" strategic goals quite challenging, as it faces significant hurdles ahead.

In summary, while Foxconn possesses a solid technological foundation, the glaring weaknesses in its brand-building strategies have pushed it towards adopting the "shovel seller" role in the AR sector, concentrating on offering core technologies and solutions to other companies as a way to leverage its strengths for growth in new markets.

The allure of being a "shovel seller" becomes particularly intriguing as the AR glasses market experiences a surge, with expectations for overall sales to continue climbingAccording to a report by Qunzhi Consulting, the global shipments of AR headsets are projected to widen from approximately 500,000 units in 2023 to 800,000 units by 2024, marking a significant increase of roughly 63%. This growth is largely attributed to the rapid expansion of the consumer-level AR glasses market, especially in areas such as media viewing and informational prompts

By 2025, global AR headset shipments are anticipated to exceed 1.3 million units, and by 2029, the output may soar past the ten-million mark, underlining significant market potential.

Various technology companies are positioning themselves accordingly in the AR glasses domainXiaomi is actively pushing the envelope, unveiling an array of innovative AR glasses that harness advanced display technologies while expanding functionalities and applicationsCollaborating closely with gaming companies, they have developed immersive AR gaming experiences, successfully garnering consumer attention and carving out a niche in the marketplace.

Apple has also ramped up its investment in AR technology R&DAt the 2024 WWDC, the company revealed that its VisionPro now offers over 2,000 native applications and introduced the visionOS2 system, aimed at further enhancing user experience and enriching product ecosystems to maintain its standing in the premium AR device segment.

Huawei, having launched its first smart glasses, Huawei Glass, back in 2019, continues to innovate, capitalizing on its cutting-edge advancements in 5G and AI

The company is committed to continuous upgrades, striving to enhance data transfer and processing capabilities to boost market competitiveness.

This current wave in the AR industry seems more foundationally solid than previous iterations, avoiding past pitfalls inherent in the bubble moments when hype drove companies into the market before their technologies were sufficiently matureEarlier AR ventures often collapsed because firms lacked actual application contexts, leading to unfulfilled promises and resultant bubble bursts.

Take Rokid, for instanceThe company aggressively pursued AR opportunities around 2018 and secured substantial financing from 2021-2023. Yet by the first half of 2024, it ranked only fourth in overall sales of consumer-grade AR devices in China, capturing less than 10% of market shareThe root cause? Rokid's reliance on partners for product development without establishing its core technological barriers undermined its market performance, falling short of investor expectations.

Furthermore, according to a survey led by LeiTian's founder and CEO, Li Hongwei, AR glasses users primarily employ their devices for entertainment like watching content and gaming—91% of users noted this—as opposed to the 9% of usage for office functions and spatial computing tasks

Yet, many AR firms invest a staggering 90% of their development efforts into these less-favored use cases, resulting in a disconnect between product functions and actual user demands, subsequently harming product relevance.

As technology continues to evolve, significant breakthroughs in key areas such as display technology, interaction frameworks, and performance optimization for AR glasses are underwayThe new generation of AR glasses employs more advanced display technologies, achieving higher resolution and contrast while significantly improving visual clarity and color fidelityInteraction functionalities are becoming increasingly responsive and user-friendly, culminating in an overall enhanced user experience.

Given such enticing market prospects, it's no surprise that Foxconn, a leader in global manufacturing, is eager to engageBy providing AR display solutions, Foxconn not only deepens its expertise in microdisplay technology but also opens avenues to integrate and innovate with related AI technologies, ultimately elevating its technical prowess

This strategy lays favorable groundwork for expansion into other related terminal markets, allowing for resource consolidation and the creation of a more robust industrial ecosystem, thereby amplifying its influence in the global tech landscape.

In the quest for being the go-to "shovel seller," Foxconn faces not only opportunities but also formidable competition from other established players like Goertek, which is strongly positioning itself in the AR arena.

Tracing back, Goertek astutely entered the Bluetooth technology domain between 2003-2004, launching its first Bluetooth headset—a milestone that laid the groundwork for its expansion in smart wearable devicesWith extensive collaborations with numerous renowned brands, Goertek continues to enhance its technical capabilities and market standing in the smart wearables space.

In 2012, seizing upon the burgeoning prospects within VR and related business domains, Goertek ventured into the "Metaverse" space

Through partnerships with major players like Meta and Sony, Goertek acquired ample R&D and production experiences, achieving significant advancements in essential tech domains like acoustics, optics, and sensors, which propelled its competitive capabilities within the VR sectors.

In 2016, Goertek took the initiative to establish the Virtual Reality Industry Alliance, uniting various stakeholders, including academic institutions, to drive collaborative tech innovation and market promotion effortsBy harnessing these joint forces, Goertek bolstered its technical research depth and market reach in the VR and AR sectors, further enhancing its industry standing.

Recently, Goertek has formed a strategic partnership with Xiaomi to propel the R&D and production of AR glassesWith its robust technical expertise in AR, Goertek offers substantial support for Xiaomi's AR endeavors, propelling the brand's swift emergence in the AR glasses sector

This collaboration not only enriches Goertek's business growth in the AR arena but also poses a significant challenge to Foxconn's influence within Apple's supply chain.

Of noteworthy importance, Goertek’s advancements in the MicroLED space—where Foxconn is keenly focused—demonstrate formidable technical prowess and market competitivenessIts self-developed, lightweight AR glasses featuring full-color MicroLED capabilities have quickly gained market recognition for their performance, quality, and user experience, thus solidifying Goertek's competitive stance in the AR landscape, translated into a direct challenge for Foxconn.

With a long-established relationship with Apple, Goertek maintains a significant foothold within the supply chain dynamics, leveraging its technical advantages to potentially secure greater collaborative prospects in future AR projects, which could inadvertently squeeze Foxconn’s market share within this critical ecosystem.

Although Foxconn’s decision to adopt the “shovel seller” role may present lower risks compared to directly handling brand operations, it faces stiff competition from capable peers