Foxconn eyes factories in US, Indonesia as China’s lustre fades

unnamed (16)Foxconn, world’s leading manufacturer of computer components and systems to build high-tech factories in the United States and low-cost plants in Indonesia as the appeal of “made in China” fades into a burden.

Beset by rising costs and labour unrest in China, Chairman Terry Gou said, “Foxconn is considering diversifying away from its manufacturing heartland. The world’s largest contract maker of electronic goods has little choice if it’s to protect margins and stay ahead of peers who have adapted the Foxconn playbook into their own success stories. The US is a must-go market. Many customers and partners have asked Foxconn to open shop in the US, with an eye on advanced manufacturing much closer to their home base.” at the group’s annual party on Sunday to mark the end of the Chinese year.

At the same time, Indonesia will be a top priority this year as a potential production base with attractive costs and skills. That would tie in with Foxconn’s deal to design and a market phone in the country with BlackBerry Ltd as the Canadian company seeks to reverse its decline in the smart phone business.

Danny Lee, a Fund Manager of Mega Financial Holding’s said, “Foxconn has no choice but to do it. China is no longer a manufacturing hub for companies worldwide, especially so for the PC industry.

In the US, Foxconn business is like flagship for the unit of Hon Hai Precision Industry Co Ltd, Foxconn Technology Co Ltd and FIH Mobile could take advantage of geographical proximity to open up new deals with partners like Apple as they develop new gadgets.

Kuo MingChi, an Analyst at Taipeibased KGI Securities, said, “I think they’re looking more closely at the US in order to move closer to some of their biggest clients. Obama is also really pushing to return manufacturing to America and boost employment opportunities.

Potential of business in Indonesia

According to Terry Gou, Foxconn’s ambitious growth plans could see it lift annual revenue to T$10 trillion ($333 billion, Dh1,223 billion) a decade from now.

The news helped shares in Hon Hai shrug off a slide in the broader Taiwan market. Hon Hai stocks eased 0.1 per cent, while the main index closed 1.6 per cent lower.

Best known for putting together iPhones, Foxconn takes the honor of its skills by meeting Apple’s exacting standards and supply chain rigour. It boasts a workforce of more than 1 million, and the scale to negotiate cheaper component prices than BlackBerry could obtain on its own.

Gou placed emphasis on Indonesia for future development. He said the country, rather than India, will be best able to replace China as the world’s manufacturing hub in the future.

Kuo MingChi, an Analyst at Taipeibased KGI Securities added “Foxconn views as a rising market with great potential. There’s also no shortage of IT personnel there. He’s prioritizing places with the most potential for domestic market growth, and Indonesia is at the top of that list.”

Indonesian government officials have said Hon Hai wants to gradually invest as much as $10 billion over 5 years with local partner Erajaya Swasembada, and Indonesia will offer the Taiwanese firm a tax package aimed at kick-starting the plan. Hon Hai has yet to confirm these details.

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