The world’s biggest electronics manufacturer has called time on China as the centre of global production, saying the country’s days “as the world’s factory are done”.
Foxconn, the Taiwanese giant best known for assembling Apple’s iPhones, said it was moving more of its production outside of China amid rising tariffs on goods made in the country. Young Liu, the company’s chairman, said that although China will be a major production hub, the country’s “days as the world’s factory are done”.
China became the fulcrum of electronics manufacturing over the past two decades as enormous factories and markets were set up in supercities such as Shenzhen. But rising wages, the Trump administration’s tariffs on Chinese imports, and the increasing importance of markets such as India, which charges tariffs on electronics imports, have led production to spread out across Asia and other parts of the world.
Foxconn, which assembles Apple products as well as other smartphones, games consoles and laptops, now relies on China for just 25 per cent of its production, against 30 per cent a year ago.
“No matter if it’s India, Southeast Asia or the Americas, there will be a manufacturing ecosystem in each,” Liu said.
Foxconn – also known as Hon Hai – reported a 34 per cent increase in quarterly profits on the back of booming demand for cloud computing equipment related to more internet use during the pandemic, and as production recovered from coronavirus-induced shutdowns at the start of the year.
Revenues fell slightly, as the company focused on higher-margin products such as high-performance computing.
Slower iPhone sales expected
However, it said it expects sales to decline in the coming months as Apple delays the release of this year’s iPhones. Apple said last month that the new devices, expected to be the first featuring 5G technology, will go on sale a few weeks later than usual. Apple is Foxconn’s biggest customer, and although demand for the company’s devices has been stronger than expected in recent months, the delay is likely to lead to slower sales in the third quarter of the year.
The White House has introduced a series of increasingly punitive tariffs on Chinese imports over the past two years, and demanded that manufacturing move to the US.
The tariffs have led manufacturers to either increase consumer prices or move production outside of China, although rarely to America. Foxconn promised to open a $10b ($15.2b) factory in Wisconsin in 2017 although it has scaled back plans and made slow progress on opening. Taiwanese microchip company TSMC recently announced plans for its own facility in Arizona.
– Telegraph Group Ltd