Foxconn says trade war means China can no longer be 'the world's factory'

AppleInsider

As it announces better than expected financial results, Apple supplier Foxconn is also reportedly planning to increase moving production away from China.

Tim Cook visiting a Foxconn assembly line in China

Foxconn, which has just reported second quarter profits 34% up from last year, is now said to believe China's manufacturing supremacy is over.

According to Bloomberg, the chair of Foxconn's parent Hon Hai Precision Industry Company, says that the company is planning to move ever more manufacturing away from China. Young Liu said it was specifically to avoid the escalating tariffs on Chinese-made goods intended for the US.

"No matter if it's India, Southeast Asia or the Americas, there will be a manufacturing ecosystem in each," he Liu said. Reuters reports that he added that China will still remain a key part of its production, but the country's "days as the world's factory are done."

Reportedly, the current proportion of Foxconn manufacturing made outside China is now 30%. In June 2019, it was 25%.

Foxconn is Apple's largest manufacturing partner and will be chiefly responsible for the production of the forthcoming "iPhone 12" range. While it has not announced moving that production away from its Chinese bases, Foxconn has previously claimed that it could produce iPhones entirely away from the country.

GeorgeBMac

If, as he says, it's all about Trump's trade war, then that will no longer be necessary once we can return to facing our real enemy:  Russia.

The UK said the same:   They were bowing to Trump's geopolitical pressure at the expense of their own best interests....

And as to there being "infrastructure anywhere" -- we saw how false that statement is as China quickly returned to full production while India and the U.S. are still struggling to control the virus.

SpamSandwich

Very risky for him to plainly state this in the press. China could simply seize their operations still in China.

foregoneconclusion

China was already on the downhill run for manufacturing prior to the "trade war" and tariffs, and Apple's groundwork in India during the Obama administration was a rather big hint in that regard. China had developed enough that there were cheaper countries for labor in the immediate vicinity and also in Mexico/Central/South America.

mac_dog

SpamSandwich said:

Very risky for him to plainly state this in the press. China could simply seize their operations still in China.

And you believe what they’re telling us? 

hammeroftruth

SpamSandwich said:

Very risky for him to plainly state this in the press. China could simply seize their operations still in China.

They could, but that would risk their clients refusing to provide them with the materials and plans for the items being made. 

They can apply pressure to his family to get him to change his statement by threatening to have them “disappear”. 

razorpit

GeorgeBMac said:

If, as he says, it's all about Trump's trade war, then that will no longer be necessary once we can return to facing our real enemy:  Russia.

The UK said the same:   They were bowing to Trump's geopolitical pressure at the expense of their own best interests....

And as to there being "infrastructure anywhere" -- we saw how false that statement is as China quickly returned to full production while India and the U.S. are still struggling to control the virus.

You think this trade war with China is something new? Just because the previous administrations chose to ignore and let them eat our lunch doesn't mean it wasn't happening.  Do you forget how just a few months ago we weren't even able to produce stupid masks and medicine because we were at the mercy of China?

Look, I get you don't like the Orange Man, that's your choice. I encourage you to go spend a few months over there. Work in manufacturing/sourcing. Attempt to purchase property, start a business, be independent as you are here. Then come back and tell us how it went.

You don't even have to go over sea's to get the full experience. Try that in Mexico. Tell them you're an American and you are here to purchase some land and start your own company. And for a preview of our future if the socialists get their way, stop down in Venezuela and try to order a nice ribeye in a restaurant.

And by the way, "the 80's called. They want their foreign policy back."

randominternetperson

Foxconn is a Taiwanese company.  I'm surprised an executive there would speak this frankly about their business in the PRC.  He must be confident in what he says, because if China does remain "the factory of the world" Foxconn's access to that factory could be threatened.

tmay

SpamSandwich said:

Very risky for him to plainly state this in the press. China could simply seize their operations still in China.

Think about that avalanche of disengagement that would occur all at once if the world's larges consumer electronics company's operations were seized in China, Then think about the flow of capital, primary in dollars, coming from the West drying up.

Oh wait. Apple only owns and operates retail stores and a PRC regulated iCloud infrastructure. Everything else is Apple's suppliers and contract manufacturers. Apple would lose massive production of its products, but China would henceforth be considered toxic for manufacturing by every Western Nation.

Resilience requires that companies disengage from China, and resilience requires that nations and companies diversify their supply chains outside of China and preferably onto multiple continents. 

COVID19 made it perfectly clear what would happen to supply chains in a black swan event, and it is a lesson that will be learned.

razorpit

allmypeople said:

GeorgeBMac said:

If, as he says, it's all about Trump's trade war, then that will no longer be necessary once we can return to facing our real enemy:  Russia.

The UK said the same:   They were bowing to Trump's geopolitical pressure at the expense of their own best interests....

And as to there being "infrastructure anywhere" -- we saw how false that statement is as China quickly returned to full production while India and the U.S. are still struggling to control the virus.

...
You're carrying water for the CPP which has *ACTUAL* concentration camps and does organ harvesting. There's no freedom of speech or thought for that matter.
...

Not to mention the one child program that just ended in 2015. How many baby girls were either murdered or given away to adoption because at the time everyone preferred a son.

The ignorance of world policies by some around here is downright scary. And if I remember correctly George was involved in education. Yikes. No wonder our country is in the situation that it is now.

mknelson

razorpit said:
You don't even have to go over sea's to get the full experience. Try that in Mexico. Tell them you're an American and you are here to purchase some land and start your own company. And for a preview of our future if the socialists get their way, stop down in Venezuela and try to order a nice ribeye in a restaurant.

That's a weak argument, cherry picking one "socialist" government that's failing. Venezuela's economy is hampered by sanctions and corruption.

US "socialists" are primarily looking for solutions to health care and poverty reduction like in continental Europe, Sweden, UK, Canada…

No problem getting a ribeye here! Helps that we have also done a much better job of getting COVID under some measure of control.

svanstrom

razorpit said:

allmypeople said:

GeorgeBMac said:

If, as he says, it's all about Trump's trade war, then that will no longer be necessary once we can return to facing our real enemy:  Russia.

The UK said the same:   They were bowing to Trump's geopolitical pressure at the expense of their own best interests....

And as to there being "infrastructure anywhere" -- we saw how false that statement is as China quickly returned to full production while India and the U.S. are still struggling to control the virus.

...
You're carrying water for the CPP which has *ACTUAL* concentration camps and does organ harvesting. There's no freedom of speech or thought for that matter.
...

Not to mention the one child program that just ended in 2015. How many baby girls were either murdered or given away to adoption because at the time everyone preferred a son.

The ignorance of world policies by some around here is downright scary. And if I remember correctly George was involved in education. Yikes. No wonder our country is in the situation that it is now.

The thing about the education system is that ir produces the teachers making up the next generation of the education system… Sprinkle some good ol' nationalism, with a hint of delusion, on top of that and it doesn't take long before a negative trend basically goes free fall plummeting.

mknelson

Trade war or no trade war, shifting production out of China was somewhat inevitable. Just like Taiwan and Japan before them the rise of the middle class and rising wages eventually leads companies to move production to lower cost countries such as Vietnam, Cambodia, India.

svanstrom

allmypeople said:

GeorgeBMac said:

If, as he says, it's all about Trump's trade war, then that will no longer be necessary once we can return to facing our real enemy:  Russia.

The UK said the same:   They were bowing to Trump's geopolitical pressure at the expense of their own best interests....

And as to there being "infrastructure anywhere" -- we saw how false that statement is as China quickly returned to full production while India and the U.S. are still struggling to control the virus.

Russia is a glorified gas station masquerading as a country. Texas has a 5th the population and a much bigger economy. I recommend not listening to hysterical cable news political activists and instead to think for yourself. 

You're carrying water for the CPP which has *ACTUAL* concentration camps and does organ harvesting. There's no freedom of speech or thought for that matter.

The west has allowed the CPP to exploit the hardworking Chinese people so that corporations can squeeze out extra profits. 

I'm APPL long. I personally and my family have made between 1.7-2 million dollars combined in our Apple investments. Up until 5 years ago, we were ignorant and had no interest in China. Since then we've been very vocal shareholders.  I doubt Apple listened to us but there's a large group of shareholders that we're part of that has been pushing Apple to diversify its manufacturing because China (CPP controlled) is NOT the future. Apple is doing this and it's great news.

That's a healthy attitude. Apple will survive, but it will be a bumpy ride unless they early on show that they actually stand for, and protect, the values that they used to represent.

georgie01

mknelson said:

That's a weak argument, cherry picking one "socialist" government that's failing. Venezuela's economy is hampered by sanctions and corruption.

US "socialists" are primarily looking for solutions to health care and poverty reduction like in continental Europe, Sweden, UK, Canada…

Except that a moderate socialist when it comes to US government leaders isn’t as moderate as it once used to be. Even Biden—who is relatively moderate—already has plans to spend trillions of dollars we don’t have. And do you really have confidence he is strong enough to not bow even more to social and political pressure by more radical socialists? Not to mention the multitrillion dollar coronavirus package by ‘moderate’ socialist thinking in the House—part of which does not even directly address coronavirus relief, yet they won’t back down.

The issue with many US socialists is that they have become so complacent with being successful as a nation they don’t understand that money isn’t ‘just there’. There has to be incentive to get people to make the money they do. Whether that incentive is greed doesn’t really matter, because these people making tons of money benefit the entire nation. 

sflocal

SpamSandwich said:

Very risky for him to plainly state this in the press. China could simply seize their operations still in China.

China's not that stupid.  If China seized a company like that, it would be the siren heard around the world for every company doing business in China to get the hell out.  China will not risk a mass exodus of companies.

I'd love to see China try that though.  Foxconn being a Taiwanese company is irrelevant imho.  

john_t

99% of what comes out of China is cheap crap that breaks within half a year. It would be a shock, but it’s better for all of us to start producing again in our own countries. We’ve let China get away with blatant human rights violations long enough. They’re bullying the entire planet, and they’ve been expanding both militarily and economically. It’s time this stops. 

asdasd

GeorgeBMac said:

If, as he says, it's all about Trump's trade war, then that will no longer be necessary once we can return to facing our real enemy:  Russia.

The UK said the same:   They were bowing to Trump's geopolitical pressure at the expense of their own best interests....

And as to there being "infrastructure anywhere" -- we saw how false that statement is as China quickly returned to full production while India and the U.S. are still struggling to control the virus.

Russia is the enemy of perhaps one or two of its neighbouring countries. The US is collecting enemies at the rate of two per administration.  Turkey is a genuine enemy of the West. 

asdasd

john_t said:

99% of what comes out of China is cheap crap that breaks within half a year. It would be a shock, but it’s better for all of us to start producing again in our own countries. We’ve let China get away with blatant human rights violations long enough. They’re bullying the entire planet, and they’ve been expanding both militarily and economically. It’s time this stops. 

Thats not true at all, they clearly have the most advanced manufacturing in the world. Tim Cook has pretty much said that. 

svanstrom

georgie01 said:

mknelson said:

That's a weak argument, cherry picking one "socialist" government that's failing. Venezuela's economy is hampered by sanctions and corruption.

US "socialists" are primarily looking for solutions to health care and poverty reduction like in continental Europe, Sweden, UK, Canada…

Except that a moderate socialist when it comes to US government leaders isn’t as moderate as it once used to be. Even Biden—who is relatively moderate—already has plans to spend trillions of dollars we don’t have. And do you really have confidence he is strong enough to not bow even more to social and political pressure by more radical socialists? Not to mention the multitrillion dollar coronavirus package by ‘moderate’ socialist thinking in the House—part of which does not even directly address coronavirus relief, yet they won’t back down.

The issue with many US socialists is that they have become so complacent with being successful as a nation they don’t understand that money isn’t ‘just there’. There has to be incentive to get people to make the money they do. Whether that incentive is greed doesn’t really matter, because these people making tons of money benefit the entire nation. 

That "can't afford"-trope is a bit too dated now.

The simple math is this: In the US the people spend a proverbial shit-ton of more money on, for example, healthcare; as compared with countries with "free"/socialised healthcare.

If you can remove that extra spending you've saved a lot of money when doing the budgets for the whole country in total; but you've also ended up with what looks like a gigantic brand new expense. The whole country in general would have saved a lot of money both directly, and indirectly due to a more efficient workforce; but some very rich people will stop becoming even more rich, so they tell the less fortunates that they can't afford to save their money at the same time as becoming healthier.

Similar thing as far as education: Very rich people are getting very much more richer by getting kids in debt for an education, even though the country at a whole would prosper more by having a better educated, more efficient, workforce (including more innovators, entrepreneurs etc). So the very rich people are telling the less fortunates that they can't afford to get a better education for free; and they do that once again by pointing a single, easy to understand, new expense posts (that don't at all take into account the total benefits).

svanstrom

sflocal said:

SpamSandwich said:

Very risky for him to plainly state this in the press. China could simply seize their operations still in China.

China's not that stupid.  If China seized a company like that, it would be the siren heard around the world for every company doing business in China to get the hell out.  China will not risk a mass exodus of companies.

I'd love to see China try that though.  Foxconn being a Taiwanese company is irrelevant imho.  

If the CCP grabbed a Taiwanese company about to exist China it would just be called an internal matter; and the rich people making money out of doing business in China would just keep on getting rich while thinking that it can't happen to them.

Back in 1979 the US basically said that the CCP, not the old KMT, was the true successor of China; and as they switched position they more or less abandoned Taiwan for China to incorporate at a convenient time. Hopefully that position will change now; and I'd loooove to see Trump open formal diplomatic relations with Taiwan as a proper sovereign state. That shitshow would be glorious.