iPhone maker Foxconn chair says China is ‘done’ as the ‘world’s factory’

For decades China has led the world as the dominating force in this area. But now, one of the architects of its success thinks those days are over.

The chairman of the company that probably made the device you’re reading this on thinks China’s days as the dominating force in electronics manufacturing are “done”.

Foxconn is a Taiwanese company that partners with device makers like Apple, Dell, Microsoft, Sony and other multinationals to produce their devices, but for years very few people had ever heard of the company.

Foxconn workers at a factory in Guizhou Province, China, in 2018. Picture: Aleksandar Plavevskiepa/Shutterstock

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In 2010 the organisation came to prominence for all the wrong reasons – after a spate of suicides and suicide attempts by workers at its factories.

Foxconn addressed the problem by installing nets.

The company remains a massive part of the supply chain of many companies, but according to its chairman Young Liu, China’s “days as the world’s factory are done”, Bloomberg reported.

Device makers have been diversifying their supply chains in response to restrictive trade tariffs on Chinese-made goods in the US.

Increased demand for iPads and laptops as more people work from home during the pandemic helped Foxconn’s bottom line in the last quarter. Picture: Glenn Chapman/AFP

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Foxconn now has around 30 per cent of its total production capacity outside of China.

In 2017, it was announced the company would get $US3 billion ($A4.18 billion) in tax incentives to build a $US10 billion ($A13.95 billion) factory in the US state of Wisconsin to produce big-screen TVs.

According to The Verge, the value of the state’s tax subsidies have risen to $US4.5 billion ($A6.28 billion), the factory has been scaled down, and not one single television has been produced there so far.

Earlier this year Foxconn anticipated it would start production by the end of 2020 but the coronavirus pandemic means that might not happen.

Foxconn also produced gaming consoles like the Xbox One (above), PS4 and Nintendo Switch. Picture: Dylan Coker

There are seven billion people in the world and only around three billion of them use smartphones, so there’s still plenty of cheap labour to produce said devices outside of China in places less economically advanced.

Countries that might have once been called “third world” are increasingly producing electronics.

“No matter if it’s India, South-East Asia or the Americas, there will be a manufacturing ecosystem in each,” the Foxconn chairman told reporters after the company announced quarterly earnings on Wednesday.

It’s looking increasingly likely the bulk of that ecosystem might be in India, as the second most populous country after China looks to become a tech manufacturing hub.

Samsung’s Note 20 Ultra is being made in India, but not by Foxconn.

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Foxconn has shifted some production of the iPhone 11 and iPhone SE to India (where Apple has around one per cent of the smartphone market because few people there can afford one).

It’s probable future models will also be assembled there.

Producing iPhones in India also avoids a 20 per cent import duty the country places on foreign-made electronics, giving Apple a chance to improve its market share.

Samsung’s upcoming Note 20 Ultra is also made in India (though not by Foxconn), which might have some contribution to the 500,000 pre-orders it’s already received there.

India recently announced a $9.2 billion incentive program to boost local smartphone production, which Foxconn, Samsung and 20 other companies have applied for a piece of, for which 60 per cent of the manufactured devices need to be exported.

LG recently assembled its Velvet mid-range smartphone in Vietnam.

Foxconn is currently on the rebound from a record slump in profits as the pandemic took its toll in the first quarter of 2020.

As the company is a key manufacturing partner for Apple, Foxconn also received a sugar hit as people transitioned to working from home, picking up new laptops and tablets to do so.

The company has forecasted it will have a sales slump for the third quarter compared to the same period last year, as Apple delays its iPhone launch.