iPhone Maker Foxconn Says China’s ‘Days as the World’s Factory Are Done’
The United States pressure on companies to exit China and start manufacturing in the U.S. or allied countries seems to work. Most countries have ousted Huawei and ZTE from participating in their 5G networks. Huawei has also stopped making Kirin SoC chips due to the non-availability of partners. TikTok is required to break up or ship out. Now Foxconn has sounded the death knell for China’s manufacturing sector.
Foxconn says that going forward China will no longer be the world’s manufacturing epicenter. And Foxconn knows what it is talking about as it is Apple’s largest supply chain partner and used to manufacture most of its products in China before the coronavirus pandemic and U.S. pressure.
Foxconn had recently announced that it will manufacture iPhone 11 and later versions in India. “No matter if it’s India, Southeast Asia, or the Americas, there will be a manufacturing ecosystem in each,” said Hon Hai Precision Industry Co. aka Foxconn chairman Young Liu told reporters on the sidelines of the earnings announcement.
While Liu stated that Foxconn would continue using China as a manufacturing base, but the country’s “days as the world’s factory are done.” Liu said it’s gradually adding more capacity outside of China, the main base of production for gadgets from iPhones to Dell desktops and Nintendo Switches. The proportion of Foxconn production outside China is now at 30%, up from 25% last June.
Liu said that going forward the ratio of production outside China will only rise as the company is moving most of its manufacturing to Southeast Asia and other regions to avoid escalating tariffs imposed by the United States.
China used to be called the factory of the world not so long ago. The trade war between the United States and China escalated in 2019 with U.S. raising import tariffs for Chinese goods, Since then, Washington and Beijing are negotiating a trade settlement. But the increased tariffs have already forced many manufacturers to either choose India or Vietnam as their base. Most big electronics firms are also exiting China for fear of repercussions from the United States government.
Foxconn reported better-than-expected net income of NT$22.9 billion ($778 million) for the quarter ended in June, boosted by increased demand for iPads and MacBooks. Revenue was NT$1.13 trillion, but Hon Hai warned that the third-quarter sales will dip as Apple delays the iPhone 12 launch.