China Said to Be Concerned About Foxconn’s U.S. Intentions (1)
- January 31, 2017
- Posted by: MIB
- Category: US
By Bloomberg News
(Bloomberg) — China’s government has conveyed its concern
over Foxconn Technology Group billionaire Terry Gou’s plan to
expand the Apple Inc. assembler’s operations in the U.S. after
President-elect Donald Trump takes office, people familiar with
the matter said.
A high-ranking Chinese official recently expressed
Beijing’s concerns directly to Gou, the people said, asking not
to be identified because the conversation was private. In
response, the Taiwanese billionaire told the senior bureaucrat
he won’t withdraw capital from China. The U.S. investment plan
hasn’t been finalized and is dependent on the policies of the
incoming administration, Gou said, according to the people.
China is pivotal to Foxconn’s massive electronics assembly
operation, which cranks out more iPhones and iPads than any
other in the world. One of China’s largest employers, Foxconn
has said it’s in preliminary discussions to broaden its
investment in the U.S., without elaborating. Trump has often
articulated his vision of bringing manufacturing jobs back to
America from China, which became the world’s factory floor
thanks to cheap labor and central policy support. And he’s
singled out Apple in the past.
A potential strategic shift by Foxconn unnerves Chinese
authorities because the company employs roughly a million
workers across the country. Major factory job cuts have been
known to trigger protests in the past, even as maintaining
social stability remains among the top priorities of the ruling
“Gou wants officials to know that he still sees China as a
market of greatest importance,” said James Yan, Beijing-based
research director for Counterpoint. “Foxconn very much relies on
China for both assembly and consumer businesses and its
suppliers are also in Asian countries. That is not going to
change at least in the next five years.”
Foxconn announced the potential expansion hours after a
pledge from SoftBank Group Corp.’s Masayoshi Son to invest $50
billion in the U.S. and create 50,000 jobs. A document Son held
up for reporters after a December meeting with the President-
elect included the words “Foxconn” and “$7 billion” alongside
SoftBank’s numbers. Shares of the Japanese company dropped as
much as 2.5 percent in Tokyo on Tuesday. Hon Hai Precision
Industry Co., Foxconn’s main listed arm, rose 0.6 percent.
It remains unclear how SoftBank and Foxconn may be working
together, or what sort of promises may have been made to Trump.
Gou told the Chinese official he was invited to the former
reality TV star’s Jan. 20 inauguration but didn’t plan on
attending, according to the people familiar with the matter.
Read more about how Foxconn and SoftBank figure in Trump’s
The Taiwan Affairs Office of the State Council and the
Association for Relations Across the Taiwan Straits, the two
mainland Chinese organizations that handle relations with
Taipei, didn’t answer calls seeking comment. Foxconn didn’t
respond to e-mailed requests for comment and calls to company
spokesmen went unanswered.
Foxconn now operates factories in Chinese cities including
Zhengzhou, Shenzhen, Taiyuan and Wuhan. But rising wages and
persistent worker shortages are prompting electronics
manufacturers look elsewhere: Lenovo Group Ltd. and OPPO are
among those that have set up facilities in Southeast Asia, for
instance. Foxconn itself has been increasing its use of robots
to reduce its reliance on migrant labor, and studying plans to
increase its footprint in India.
Any shift back to the U.S. may involve Apple, which now
accounts for about half of Hon Hai’s revenue. Apple Chief
Executive Officer Tim Cook, however, told 60 Minutes in 2015
that the U.S. simply lacks enough skilled workers in advanced
Then there’s cost. The components of an entry-level iPhone
7, which sells for $649, cost $224.80, according to research
firm IHS Inc. Assembling those parts into a finished product,
mostly in China, costs about $10 now, Jason Dedrick, a professor
at Syracuse University, has estimated. Doing that work in the
U.S. would add $30 to $40, he reckons.
Foxconn’s rivals however are reportedly open to the
possibility. Pegatron Corp., another major assembler of Apple
products, can expand its U.S. capacity three- to five-fold if
necessary, a Taiwanese financial outlet cited Chairman Tung Tzu-
Hsien as saying on Sunday.
“Foxconn may expand its research and development as well as
some high-precision manufacturing to the U.S.,” Yan said. “But
the main part of the assembly business will stay in China.”