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Foxconn to shift production away from China

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Foxconn plans to move more production away from China, arguing that the ongoing trade war between the country and the US means it can no longer be considered as the “world’s factory”.

The contract manufacturer is a key supplier for Apple and various other electronics companies, with China hosting the majority of its production facilities.

However the proportion of activity outside the country has risen to 30% from 25% in June and is expected to increase, according to Bloomberg.

Foxconn China

Speaking to investors, Foxconn said it would have to create separate manufacturing ecosystems for certain markets. For example, goods intended for the US would be made in other parts of South East Asia such as India in order to avoid tariffs on Chinese-manufactured products.

Apple is Foxconn’s biggest customer, accounting for half of its sales, and therefore particularly susceptible to US sanctions. Foxconn stressed that its statements were made without and company or product line in mind, but its clear that separate ecosystems would be beneficial for Apple.

Last year it was reported that Apple was concerned about its dependence on Chinese manufacturing given rising labor costs and wider political trends and that it could move as much as 30% of its activities elsewhere. However this would be a long-term process given the complexities of such a move.

The Cupertino-based company has established a significant ecosystem of suppliers and rapid assembly capabilities (such as those provided by Foxconn) in China with five million jobs dependent on its presence in the country. Apple itself employs 10,000 people in China.

Longer-term trends may also have played a part in Foxconn’s decision. China has long been a major manufacturing hub for the entire mobile industry, but rising costs and fears of an economic slowdown last year have seen many vendors exit the country and outsource production to contract manufacturers.

A separate report suggests Foxconn may come under pressure from Apple to adopt more renewable energy. The company wants to be carbon neutral by 2030 and although Foxconn currently gets 90% of its power from non-renewables, it is investing in solar panels and offshore wind farms. Any relocation of resources would need to take this into account.

Via Bloomberg