Foxconn Prepared to Move Apple Production Out of China

Discussion in 'Wall St. News' started by bone, Jun 11, 2019.

  1. bone

    bone ET Sponsor

    Wall Street Journal

    Foxconn Says Prepared to Move Apple Production Out of China if Necessary

    Taiwan-based company tries to brush off investor worries over U.S.-China trade row

    HONG KONG—Foxconn Technology Group said it is ready to shift production for Apple Inc. out of China if necessary, as the electronics assembler tried to assuage investors’ concerns over the U.S.-China trade conflict.

    In the company’s first-ever investor meeting and conference call since going public in 1991, senior executives at Taiwan-based Foxconn sought to address investor uncertainty as it prepares for a leadership transition.

    Tuesday’s events were aimed at outlining a succession plan for when Terry Gou, Foxconn’s founder, stands down as chairman to focus on his campaign for Taiwan’s presidency. Much of the discussion, however, centered on the worsening trade dispute between China and the U.S. and the impact tariffs might have on the core of Foxconn’s business—assembling iPhones and iPads for Apple, mostly in China.

    “We are totally capable of dealing with Apple’s needs to move production lines if they have any,” said Young-Way Liu, the head of Foxconn’s semiconductor business group, said during the meeting at the company’s headquarters outside Taipei.

    Mr. Liu said Foxconn’s manufacturing capacity outside of China is sufficient to supply Apple and other customers with products for the U.S. market and that production could be expanded at factories globally “according to the needs of our clients.”

    Foxconn has plants in Brazil, Mexico, Japan, Vietnam, Indonesia, the Czech Republic, the U.S. and Australia among other countries, according to the investor presentation.

    Formally known as Hon Hai Precision Industry Co., Foxconn is the world’s biggest contract electronics manufacturer and relies on Apple and China for a large portion of its business. Around 50% of Foxconn’s revenue is related to Apple, analysts say. Meanwhile, only about 25% of its manufacturing lies outside China, according to Mr. Liu.

    Foxconn and other manufacturers have been laying plans to shift some production out of China as the trade tensions continue to escalate with no resolution in sight, according to many analysts.

    The company has already seen clients, including Apple and Huawei Technologies Co., move production to other locations, Mr. Liu said. Planning for such a shift has gathered steam since the U.S. last month increased import tariffs on $200 billion of Chinese goods to 25% from 10%, and proposed to tax another $300 billion of China exports, including smartphones, according to industry executives.

    The new tariffs “killed a lot of people’s hope both China and the U.S. will reach an accord,” one of the executives said. “Now everyone realizes this is a long-term change.”

    As many companies plan production shifts, Chinese officials told some foreign technology companies last week that there would be unspecified consequences if they pulled out of China, The Wall Street Journal has reported.

    Foxconn recently said it set up a team to deal with fallout from trade tensions and that it is monitoring the situation around the clock.

    The company faces a series of business challenges as it seeks to lessen dependence on Apple, its biggest customer. Foxconn acquired Japanese electronics maker Sharp Corp. three years ago to develop its own consumer brand, and it has been expanding into semiconductors. Mr. Liu said the company will focus on designing semiconductors.

    As Mr. Gou plans to step down as chairman, Foxconn is also preparing to move away from the top-down, detailed and hands-on management style that he employed to build the company over four decades. Mr. Gou, who turns 69 this year, is one of five candidates seeking the Nationalist Party, or Kuomintang, nomination for the Taiwanese presidency. The party will select its candidate next month for the general election due to take place in January.

    At Tuesday’s meeting, Foxconn executives said the company is setting up a committee of nine executives to determine major corporate strategies and take on Mr. Gou’s responsibilities. The committee will meet weekly and report to the board, Mr. Liu said.

    The panel will consist of four board members and five executives, including Mr. Liu, current board member Fang-Ming Lu, who is the chairman of Asia Pacific Telecom Co., and Sung-ching Lu, the chairman of Foxconn Interconnect Technology Ltd.

    Mr. Gou will retain a board seat and remain Foxconn’s largest shareholder, with some 10% of shares. He won’t participate in discussions on corporate strategy since he won’t be a member of the operations committee, Mr. Liu said.

    Employees and analysts have said that many Foxconn executives are capable of running daily operations at the company, though none has the star power of Mr. Gou. He has developed a personal rapport with chief executives such as Apple’s Tim Cook and has won accolades from President Trump. The company, after much back and forth, decided earlier this year to proceed with the construction of a liquid-crystal display factory in Wisconsin.
     
  2. bone

    bone ET Sponsor

    Foxconn could make all US iPhones outside of China if needed, says company

    ‘We can help Apple respond to its needs in the US market’

    A senior Foxconn executive says that the company could move production of all iPhones destined for the US out of China if the current trade war demands it. In comments reported by Bloomberg and The Wall Street Journal, the head of Foxconn’s semiconductor business group, Young Liu, said, “25 percent of our production capacity is outside of China and we can help Apple respond to its needs in the U.S. market.”

    “We have enough capacity to meet Apple’s demand,” Liu said at an investors’ conference. Apple has yet to instruct Foxconn to move production out of China according to Liu.

    Apple might need to rethink manufacturing after tariffs up to 25 percent come into effect at the end of June. The new tariff is expected to apply to the wholesale cost of devices like phones, laptops, and tablets imported from China to the USA, the market where a third of Apple’s iPhone revenue comes from. It would be up to Apple to decide how much of the extra cost to pass on to US consumers. Analysts quoted by Bloomberg suggest that passing the cost of the tariffs on in their entirety could result in price increases of between nine and 16 percent, resulting in a drop in demand of anywhere between 10 and 40 percent. Alternatively, absorbing the cost entirely could hit Apple’s earnings per share by six to seven percent.

    Foxconn has a big incentive to help Apple since the company is said to be responsible for as much as half of Foxconn’s revenue. A drop in demand for iPhones would lead to a drop in manufacturing demand from Foxconn. The manufacturer is already preparing to shift some iPhone production to India in an attempt to avoid India’s 20 percent import duties.

    However, with China planning to retaliate to the Trump administration with a tariff increase of its own, it will be difficult for Apple to escape the impact of the trade war entirely.
     
  3. Here4money

    Here4money

    Mexico could use the business
     
  4. newbreak

    newbreak

    why are people in 'Hong Kong' which never did have 'democracy prior to 1997? it was authoritarian British rule territory with British rule of law but no 'democracy' in fact the Chinese were even allow in certain parts of the territory reserved for British parts of the city. hong kong is SAR. special administrative region.

    The central gov't in 'Beijing' is cracking DOWN hard in many cities like Hong Kong which were abusing their local gov't decisions and no oversight from central command. you have an entire city cracked down for gambling, prostitution. bribery. hong kong and Taiwan is territory to many gangs involved I racketerrig, corruption. during Mao,,these people killed. and public clapped their hand in public hangings.

    these kids or fooled or brainwashed. extradicting 'criminals' who escaped to hong kong. these fraudsters, corrupt businessmen, the entire Chinese gov't is now under new leadership and corruptiong ,anti-morality, and environmental a new generation of communist party members entering the party. the old red guard of the 1950's are passe. these new communist party members in china are women and highly educated too. and less corruptible.

    these people in Hong Kong especially the young think Hong Kong was always like this. it's fishing village when British came along. and vast majority of the residence were war refugees from China after 1949 China civil war. many escaped to Hong
    Kong, or Taiwan after the communist takeover rand subsequently killing of counter revolutionairies during the 50's -millions were killed by the communist. it's a city state than that the city has no real purpose to the overall GDP or economic importance to China.
    this GOU is afraid his company is now a target by the communist party in China. as enemy of the state.
     
    Last edited: Jun 11, 2019
  5. bone

    bone ET Sponsor

    Cult of Mac
    June 13, 2019

    More Apple suppliers looking to manufacture outside China

    Two more manufacturers which regularly do work with Apple are eying up new potential plant locations outside of China. Wistron is reportedly looking to open a factory in the U.S. or, as a backup, Mexico. Chassis maker Catcher is, meanwhile, looking at Southeast Asia or Taiwan as locations.

    This comes at a time when fears about a burgeoning trade war between China and the U.S. is making people worried about possible future trade.

    Wistron has already started expanding overseas. A couple years back, it started producing iPhones in Bangalore, India. In attempting to open a plant in the U.S., it would follow in the footsteps of fellow manufacturer Foxconn. Foxconn is currently working to build a 13,000-worker factory in Wisconsin. However, this project has run into various problems.

    A number of manufacturers are exploring overseas locations. Pegatron, for example, has talked about moving iPad and MacBook production out of China. Recently, Foxconn revealed that it had the capacity to produce all U.S.-directed iPhones out of China.

    There are plenty of reasons manufacturers would want to expand their operations. But fear about tariffs is surely a big one. Some analysts have suggested that tariffs on imported Chinese products could result in increased prices of hundreds of dollars for Apple products.

    As a result of this, the always business-savvy Apple may start looking at other places where it can have its products made cheaper. The likes of Wistron and Catcher no doubt want to be in a position to take advantage of this eventuality!