Foxconn stock price surges after cutting a new production deal with Byton

Written by: Michael Harris
January 6, 2021
  • Foxconn reached an agreement with the Chinese electric automaker Byton
  • Foxconn plans to invest around $200 million in Byton as it attempts to further diversify its business
  • Shares of Foxconn are up over 4% this week, however, buyers failed to sustain today’s gains

Shares of Foxconn (T: 2354) are up over 4% this week after one of the key iPhone suppliers reached an agreement with the Chinese electric automaker Byton to take part in the manufacturing of its first vehicles.

Fundamental analysis: EV market opportunity

The deal comes as the Taiwan-based electronics company is looking to expand its operations beyond just manufacturing tech products. According to media reports, Foxconn plans to invest around $200 million in Byton as it attempts to further diversify its business and reduce its reliance on Apple. 

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Two companies, as well as Nanjing Development Zone, inked a strategic cooperation framework agreement to work together on the production of Byton’s first SUV M-Byte, expected to launch in Q1 2022. 

The deal might prove very important to Byton which unveiled the M-Byte back in 2018 but failed to accelerate the production process ever since. Furthermore, the Nanjing Development Zone was forced to shut down operations in July and initiated a revamp after taking a big blow from the coronavirus pandemic. 

Foxconn introduced a series of tools to help the company produce large parts for electric vehicles that would be manufactured by the Taiwan-based company. This set of tools includes both the framework and the software for the vehicle. 

The company is a common supplier for other carmakers including Elon Musk’s Tesla. 

The auto market in China, the largest one in the world, continues to expand. Chinese EV startups Nio, Li Auto and Xpeng have each reported that their car deliveries more than doubled in 2020 and closed the year with new monthly highs. 

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Technical analysis: Volatile trading

Shares of Foxconn are trading in a volatile manner this week. Foxconn stock price initially rose over 4% on Monday, before adding 0.9% yesterday. However, today’s rally that took the price action to 6-month highs hasn’t been sustainable as buyers failed to hold onto gains. 

Foxconn daily chart (TradingView)

This is a bearish development for the stock as today marked a failed breakout given that the price action traded above the descending trend line at 56.0, before closing lower at 55.7. The next support line is located at 54.6. 

Summary

Apple supplier Foxconn has cut a deal with Chinese electric carmaker Byton to work together on producing its first electric vehicle. Foxconn will invest around $200 million in Byton to get exposure in the next-generation cars market.