Apple supplier Foxconn to step up investments in India and Taiwan

Date: Wednesday, June 24, 2020
Source: Nikkei Asian Review

Tech manufacturer redoubles diversification amid coronavirus pandemic and trade war

TAIPEI -- Key Apple supplier Foxconn is to step up its investments in India and Taiwan this year as it redoubles efforts to diversify away from China amid the deepening rift between Beijing and the U.S. over trade and technology.

"In a broader picture, India will be a good place to develop and we are fully working in that direction. We will share more details regarding our next step of investments [in India] in the coming months," Foxconn Chairman Young Liu told shareholders at the company's annual general meeting on Tuesday.

"For Taiwan's part," Liu said, "the expansion of investment will be focused on the three growing areas -- meaning electric vehicles, robotics and segments related to smart medical devices -- that Foxconn sees as growth drivers for the future."

Liu said Foxconn was also weighing how governments have responded to the coronavirus pandemic. While investment plans in India and Taiwan were slightly affected because of COVID-19, "the direction to expand in the two areas is unchanged," he said.

Foxconn is the world's biggest contract manufacturer, supplying companies from Apple, HP, Dell, Amazon and Google to Huawei and Xiaomi. The remarks by its chairman suggest that a migration of manufacturing away from China, which has been the world's key manufacturing powerhouse for decades, is set to continue.

Foxconn, which has production in Asia, Europe and the Americas, has been relocating some capacity away from China since the trade war between Beijing and Washington escalated in 2018. The Taiwanese company has wanted to shelter its output from punitive tariffs levied by the U.S. against goods produced in China.

Taiwan, India and Vietnam were among the locations where most expansion has taken place in the past two years. Liu has said the company has invested more than 11 billion New Taiwan dollars ($371 million) in India and more than NT$6 billion in Vietnam in 2018 and 2019.

Vietnam is Foxconn's largest manufacturing hub in Southeast Asia, and capacity there is bigger than in India, according to Liu. Google's upcoming Pixel 5 will be produced directly from Vietnam later this yearby Foxconn's Android-phone affiliate FIH-Mobile, multiple sources told the Nikkei Asian Review.

Foxconn's facilities in India make older generations of iPhones, such as the iPhone XR and iPhone 8, as well as TVs and smartphones for companies like Xiaomi, the Nikkei has learned.

Back home, Foxconn has already shifted some data center, server, and networking-related production back to Taiwan because of Washington's punitive tariffs on Chinese imports and also because of some American clients' security concerns.

The U.S. and China have been locked in a bitter tech war since 2018, prompting companies to lower their operational risks by diversifying their production.

The COVID-19 outbreak then reinforced tech companies' desire to spread manufacturing capacity across the region in the long term rather than rely on one country.

Liu said in last year's annual general meeting that Foxconn was well placed to support customers' diversification moves if needed, with 25% of its total production capacity outside China and production sites in 16 countries.

The coronavirus pandemic greatly disrupted tech manufacturing, Liu said. "We had zero output in one of the three months [in the first quarter], but we still manage to churn out profits," he said.

"As for the third quarter of this year, demand currently looks better than expected," Liu said.

However he declined to confirm whether Foxconn could still reach its target to increase revenue this year by between 1% and 3%.


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