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Business

Terry Gou, Hon Hai's inimitable, imperious chief

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Terry Gou, chairman and CEO of Hon Hai Precision Industry (Foxconn Technology Group)   © Reuters

TAIPEI   Terry Gou's long and occasionally fraught pursuit of Japanese electronics conglomerate Sharp reveals much about the strengths and weaknesses of the 65-year-old founder of Hon Hai Precision Industry, the world's largest contract electronics manufacturer.

     Gou's tenacity has brought opportunities and high growth to his company, which is also known as Foxconn Technology Group, and its shareholders. Yet his domineering, sometimes willful approach can alienate those he might need as allies.

     Hon Hai wants Sharp, a hemorrhaging household name around the world, for its advanced display technology. The Taiwanese company is prepared to pay 700 billion yen ($5.98 billion), compared to the 300 billion yen that has been offered by the state-backed Innovation Network Corp. of Japan. Hon Hai has sweetened its offer by promising not to fire Sharp's management or demand that existing lenders waive debts, as INCJ has been proposing.

     Gou even tempered his normally imperious manner to make a gentle appeal: "We don't want to destroy this company," he said. "We want to keep this company [for] another hundred years. Working with us is the right decision."

     The softer approach seemed to be working. Kozo Takahashi, Sharp's president, revealed in early February that his company is devoting more resources to studying Hon Hai's bid than INCJ's. Sharp plans to make a decision within the month, according to Takahashi.

     Yet Gou's cocky nature, never far beneath the surface, may have undone his recent progress. On Feb. 5, he marched into Sharp's offices to press his offer.

     "I am hoping to nail the deal this afternoon," Gou told reporters outside Sharp's headquarters in Osaka. But the hours of negotiation that followed were inconclusive. Gou told the press that Sharp had given Hon Hai first refusal rights, but Sharp refuted this.

     The parties are clearly not finding it easy to reach an agreement, and Gou's brash style may have done little to reassure the beleaguered Sharp management. It has never been an easy relationship. When Gou negotiated with Sharp for a minority stake in 2012, he reportedly put backs up by saying he could buy the whole business if he chose. Subsequently, he agreed to take 9.9% of the company for 550 yen per share, but retracted the offer as the stock price plummeted. The incident left bitter feelings in Osaka.

HANDS-ON WORKAHOLIC   Gou is often compared to a military strongman. Aides say he frequently overrules his senior executives and advisers on key decisions -- but more often than not he is vindicated.

    Terry Cheng worked under Gou at Hon Hai from 2007 to 2012 and had served as his longtime counselor before that. When Gou wanted to establish Innolux in 2003 to develop liquid crystal display technology, Cheng recalls that there was little support for the idea among Gou's external advisers. Taiwan already had plenty of suppliers. Gou prevailed, however, and has established Innolux as the world's third-largest LCD maker after Samsung Electronics and LG Display in South Korea.

Hon Hai Chairman Terry Gou shows off an agreement with Sharp President Kozo Takahashi after meeting with Sharp executives in Osaka on Feb. 5.

     "At Foxconn, no one works longer and harder than Chairman Gou. He works 15 hours a day, seven days a week," Cheng said, echoing a senior aide to Gou.

    "Chairman Gou is not a genius," said the aide, who declined to be named. "He got to where he is today by hard work and assiduousness. He knows Foxconn's technology better than anyone else, and that is why he has better judgment than his senior executives."

     While Gou is an inspiration to many who work for him, often around the clock, he also courts controversy and is viewed in Taiwan as something of a loose cannon. There was public dismay there when he said in 2014 that democracy could not boost the local economy. His intimate ties to the outgoing ruling China-friendly Kuomintang, or Nationalist Party, has not improved his popularity -- the Nationalists were trounced in presidential and parliamentary elections in January. It has also not gone unnoticed that Foxconn, a key contract assembler for Apple, employs some 1 million workers in China but only 10,000 in Taiwan.

     Gou's devout worship of Guan Yu, a legendary Chinese general, is considered eccentric. Guan served under Liu Bei, a warlord in the Three Kingdoms period in the third century, and is revered as Lord Guan. Gou wore a bright yellow scarf that had been blessed at a Lord Guan shrine in Shanxi, his father's home province in China, when he arrived for his talk with Sharp on Feb. 5.

RAGS TO RICHES    Whatever his foibles, Gou has excelled in business. From its headquarters in Tucheng, a gritty Taipei suburb, Hon Hai's manufacturing empire stretches across the world, from China, India and Vietnam to the Czech Republic, Mexico and the U.S. In 2015, revenue hit a record 4.48 trillion New Taiwan dollars ($134 billion), about half of which came from Apple contracts.

     Gou's origins are modest. His father came to Taiwan from China and became a policeman. In 1974, equipped with a degree from a local maritime college and some experience in a shipping company, Gou used NT$100,000 he received from his mother to start up a business making plastic components. He soon began to focus on producing molds, which to this day remains one of Hon Hai's core competencies.

     A breakthrough came in 1980 when Gou won an order from Atari, the U.S. game maker where the late Steve Jobs gained some early experience, supplying connectors for joysticks on game consoles. In 1988, Hon Hai revenue exceeded NT$1 billion and the company started building plants in China.

     By the mid-1990s, the company had made a name for itself as an Apple supplier, making frames for Macintosh computers. In 1996, Gou boosted the company's manufacturing credentials with a large component order from Compaq while he was still building new facilities in Shenzhen in southern China. He outsourced production to other factories until he could get the Shenzhen plant operating.

     Gou feels that particular decision was key to the rapid growth that followed. He regularly reminds his lieutenants of how he slept in a shipping container on the construction site in Shenzhen for months in order to make sure the Compaq order was filled.

STRING OF TRAGEDIES   One of the toughest challenges for Gou came in 2010, when a string of suicide attempts resulted in at least 10 confirmed deaths at the Shenzhen factories. The tragedies shocked the world and thrust the still relatively unknown company into the public gaze. Its "military-style" management, with long working hours, was heavily criticized in the international press and by labor groups.

     "I am deeply saddened, and I have not been able to sleep well for a month," Gou said in May 2010 after another suicide attempt came to light. Hon Hai has since raised its minimum wage, set up counseling hotlines and capped overtime.

     The Shenzhen problems followed the death of Gou's first wife, Serena Lin, from cancer in 2005 and his brother, Tony, from leukemia in 2007. These losses motivated Gou to become involved in charities and sponsor cancer research. He has also donated elsewhere, including most recently NT$200 million for victims of the massive earthquake that struck Tainan, a city in southern Taiwan, on Feb. 6.

     With no heir apparent, Hon Hai has a succession crisis brewing. There is speculation that the company will be carved up once Gou departs, though the man himself has no immediate plan to go anywhere.

     "I still have my family to support, so I cannot retire too soon," he said in 2014.

     Gou now has another compelling reason to remain in the driver's seat. Should it transpire, the Sharp acquisition would be Hon Hai's biggest corporate buyout and the group's first merger with a major non-Taiwanese company. Even without the delicate relationship that already exists between the two, turning around the ailing but proud Japanese electronics giant would be one of Gou's toughest challenges ever.

Nikkei staff writer Cheng Ting-fang contributed to this report.

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