On July 24th, Foxconn's parent company, the globally renowned electronics manufacturing services giant, Hon Hai Precision Industry Co., Ltd., officially announced a significant investment. Foxconn will invest in the construction of a new business headquarters building in Zhengzhou to house its new business headquarters functions. This strategic move not only demonstrates Foxconn's ongoing commitment and confidence in the Chinese market but also heralds a new round of expansion and upgrading of the group's business map.
The first phase of the project is located in the Zhengdong New District, with a construction area of about 700 acres and a total investment of approximately 1 billion yuan. The main construction includes seven major centers: the headquarters management center, R&D center and engineering center, strategic industry development center, strategic industry financial platform, industry research institute and key talent center, marketing center, and supply chain management center. These will provide industrial resources and technical support for Foxconn's implementation of the 3+3 strategy on the mainland. At the same time, focusing on the implementation of the 3+3 strategy, Foxconn will focus on the layout of electric vehicle trial centers, solid-state batteries, and other projects in the Zhengzhou Airport Economic Comprehensive Experimental Zone.
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What is particularly eye-catching is that this investment also clearly reveals Foxconn's ambitions in the field of new energy vehicles and future energy technology. The surrounding area and related areas of the building will be laid out with electric vehicle manufacturing bases and solid-state battery R&D and production projects. This marks Foxconn's official entry into the high-growth track of new energy vehicles, aiming to promote breakthroughs and applications of electric vehicle and solid-state battery technology through technological innovation and resource integration, contributing to global green travel and energy transformation.
Whether in terms of investment scale or strategic positioning, the new business headquarters building newly built by Foxconn is of great significance. These signals indicate that Foxconn is returning to China again and also show their determination to use mainland China as a major base.
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Foxconn's layout in the Indian market
In sharp contrast to this increase in Zhengzhou, in 2019, Terry Gou made a bold statement, "I build factories on the mainland, which is to feed the people on the mainland!" After that, Foxconn has been accelerating the "detachment" from China. On the one hand, the scale of many factory areas of Foxconn on the mainland continues to shrink. On the other hand, they continue to increase investment in Southeast Asia and South Asia. The reason for Foxconn to do this is, on the one hand, to follow the pace of Apple and move to the huge potential market of Southeast Asia and South Asia. On the other hand, it is also intended to reduce dependence on mainland China.
Looking back on the development process of Foxconn, it can be said to be an epic of growing together with the manufacturing industry of mainland China. Since entering the mainland market in the late 1980s, Foxconn has quickly stood out in the field of electronics manufacturing with its advanced production technology, strict quality control, and efficient production management. With the rise of technology giants such as Apple, Foxconn has successfully become a core supplier of companies like Apple with its professional capabilities and scale effects in the manufacturing field, providing hundreds of millions of high-quality electronic products for global consumers.To a certain extent, the mainland of China and Foxconn have achieved mutual success over the past few decades. The mainland has provided Foxconn with favorable policies, abundant cheap labor, and industrial support, which has helped Foxconn grow and become the world's largest contract manufacturer. In return, Foxconn has brought a large number of jobs to the mainland of China, driving the growth of local economic industries and exports.
Currently, many regions in our country, especially Zhengzhou in Henan, have formed a strong employment and economic dependence on Foxconn. A large part of the iPhones that Foxconn manufactures are completed in the Zhengzhou park, and Foxconn has become the main export enterprise in Zhengzhou.
Data statistics show that since Foxconn entered Henan, the total import and export volume has accounted for about 60% of Henan's total import and export volume, and the proportion of Zhengzhou's total import and export volume has reached about 80%. Under the drive of Foxconn, the Xinzheng Free Trade Zone has achieved leapfrog development, and by 2023, the total import and export value reached 407.278 billion yuan. The import and export value generated by the Xinzheng Free Trade Zone alone accounts for 50.23% of the whole province of Henan, and the Xinzheng Free Trade Zone has also become the first among the national comprehensive free trade zones.
However, in recent years, the labor cost in mainland China has been rising continuously, and environmental protection policies have become increasingly strict, leading to an increase in Foxconn's operating costs, which has risen with the tide. At the same time, emerging markets such as India have attracted more and more international companies to invest and set up factories with their low labor costs. Against this backdrop, Terry Gou began to consider moving 300 billion yuan of production capacity to emerging markets such as India, and has been diversifying the supply chain by turning part of the supply chain to India.
As early as 2015, Foxconn announced the establishment of a production base in India, providing local employment opportunities and technical support. With the continuous development and growth of the Indian market, Foxconn's investment in the Indian market is also increasing. This year, Terry Gou even announced an additional investment of 500 million US dollars in the factory in Telangana, India, which will create 25,000 jobs locally.
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Foxconn increases its stake in the mainland, the root cause is the return of the Apple industry chain
In recent years, the domestic low-end manufacturing industry has gradually shifted to Vietnam and India, and Foxconn, as the world's largest electronic contract manufacturer, has also turned some of the industry chain to India and Vietnam. However, as Apple's investment in Indian factories encountered bottlenecks, the situation reversed.
News shows that the iPhone 15 manufacturing business of the Indian factory only accounts for about 10% of the total, and there are many problems. Because the Indian factory needs to rely on importing a large number of parts from mainland China, both quality and efficiency are affected; in addition, there are also problems with the yield rate of the iPhone manufacturing in the Indian factory, with a yield rate of only about 50%.
These two issues have caused trouble when the products are shipped to the European and mainland Chinese markets, affecting market sales. Due to the unsatisfactory assembly of the iPhone 15 in the Indian factory and the return of goods, Apple was also forced to significantly reduce prices.After the lessons learned from the Indian factory, Apple no longer dares to bet on high-end models in Indian factories, but has decided to place some of the latest high-end iPhone models for OEM production in mainland China.
In addition to Foxconn, Apple has also allocated a large number of orders for the production of high-end iPhone 16 series to BYD, which is also a partner in assembling iPads.
On March 22, BYD President Wang Chuanfu met with Apple CEO Tim Cook at Apple's China headquarters in Shanghai. During the meeting, Cook said, "For Apple's supply chain, I think there is no place more important than China." When the Minister of Commerce Wang Wentao met with Cook, Cook also reiterated that Apple will continue to be committed to long-term development in China and continue to increase investment in China's supply chain, R&D, and sales.
Foxconn's investment in the new energy vehicle track may also be related to Apple's resumption of its car-making plan. It is precisely following Apple's deployment that Foxconn decided to heavily invest in mainland China to consolidate its position in the OEM industry.
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Reasons for the "disfavor" of the Indian market
There are two main reasons for Foxconn to build a factory in India. First, to meet the needs of major customers such as Apple, to diversify the supply chain risk, and to ensure stable production. Second, Foxconn is eyeing the huge and cheap labor market in India, intending to reduce costs. Terry Gou believes that Foxconn can replicate its success in mainland China wherever it is. However, the reality is cruel, and now the Indian market seems to be gradually "disfavored." In summary, there are the following fatal problems in the Indian market:
Firstly, although the labor cost in India is low, the quality and technical level of the workers are hard to match with the mainland, leading to unstable product quality and low production efficiency. Although India is also a country with a population of 1.4 billion, the popularity of education in India is far less than that of our country, and the quality rate of products can be seen from the problem.
Secondly, the business environment in India is too poor, which brings great challenges to Foxconn's production and operation. India's attitude towards foreign-funded enterprises is changing. At first, India attracted foreign-funded enterprises to invest by providing tax incentives and other conditions, but once these enterprises grew and developed, India began to suppress and harvest through various means. Taking Wistron as an example, it came to India to build a factory before Foxconn, but was acquired by the Indian Tata Group and was forced to announce its withdrawal from the Indian market.
By acquiring Wistron, the Tata Group has become an Indian OEM factory for Apple's iPhone and is also negotiating with Compal to acquire a majority stake in its Indian factory. Once these acquisitions are completed, the Tata Group will further expand its influence in the electronics manufacturing industry and become an important force in the electronics manufacturing industry in India and even globally.In order to strengthen its capabilities in the field of smartphone manufacturing, the Tata Group has already begun to actively poach talent. The Tata Group has lured a large number of technical talents from Foxconn in India at high prices. These talents possess rich experience and skills, and are an important pillar for Foxconn in the field of smartphone manufacturing.
Although India is a country with a huge market, its business environment has always been criticized, and even Indian media admit that India's business environment is indeed not very friendly to multinational companies.
In addition, India's infrastructure and supply chain construction are far from as well-developed as China's. The development of the manufacturing industry requires the support of a sound supply chain system, including raw material procurement, parts supply, logistics transportation, and other aspects. However, there are significant flaws in India's supply chain system, leading to low production and delivery efficiency for manufacturing enterprises. Moreover, India has a huge gap with China in infrastructure construction such as electricity and transportation.
Finally, India's policy support is insufficient. Although the Indian government has put forward slogans like "Make in India," the actual support is relatively small. Compared with the Chinese government's investment and policy support in the manufacturing industry, the Indian government's support is far from enough.
Despite India's attempts to imitate China in developing the manufacturing industry, the challenges faced by India in terms of infrastructure, labor, government support, and supply chain make it difficult for India to achieve the status of Chinese manufacturing.
Apple's main supply chain is still in China, but India should not be underestimated.
Although there have been frequent reports in recent years of Apple's supply chain moving out, China still has a clear advantage in terms of the number of specific supply chain enterprises.
In April of this year, Apple published its 2023 fiscal year annual supply chain list on its official website. Judging from the distribution of factories on the list, there are 155 factories in mainland China, ranking first; the second is 49 factories in Taiwan, China, and the third is 41 in Japan. In Southeast Asia, there are 32 factories in Vietnam, 23 each in Thailand and Singapore, 18 in Malaysia, and 16 in the Philippines. In addition, the United States and India have 25 and 13 factories, respectively.
In addition to holding the top spot in the supply chain, China also has a significant impact on many of Apple's overseas factories. Taking Apple's factories in India as an example, they rely on importing a large number of parts from mainland China, which affects both quality and efficiency. In fact, the proportion of iPhone 15 factories in India is only one-tenth.As Apple's new 16th-generation mobile phone is about to enter its production peak, both Shenzhen Foxconn and Henan Foxconn have launched an intense recruitment war, which also shows that China's importance to Apple remains stable.
Since July, leading companies in the Apple supply chain such as Luxshare Precision, Foxconn, Lens Technology, and O-Film have been massively recruiting workers. The recruitment information of these companies has almost "dominated" the job market's billboards, with some manufacturers even continuously increasing wages to "snatch people."
The Chinese supply chain is incomparable to the Indian supply chain, forcing Apple to make a rational business choice.
However, there are also reports suggesting that we still need to be vigilant about the transfer of the industrial chain to the Indian market. Apple may assemble the iPhone Pro model in India for the first time, led by Foxconn.
Moreover, India is gradually increasing its infrastructure construction. After the 2024 Indian general election, Modi announced plans to further expand infrastructure construction. In the budget submitted by the new government on July 23, infrastructure investment was given a prominent position.
The head of India's finance department emphasized that from 2014 to 2023, a total of 43.5 trillion rupees has been invested in the infrastructure industry. Modi stated: "The development of the past 10 years is just an appetizer, the main course will appear in the third term."
In addition, Indian Prime Minister Modi announced the "Future Skills Initiative" in 2018. Since then, the Indian Ministry of Electronics and Information Technology and NASSCOM have been working with the IT industry to train more than 200,000 IT employees through the "Future Skills" platform. Currently, the platform offers skill training in 10 emerging technologies such as artificial intelligence, cybersecurity, and blockchain, covering 70 new positions and 155 new skills.
Due to the existing demographic dividend, by 2030, India will have more than 90 million people joining the labor market. In addition to the government, Indian IT giants have also been investing in employee retraining and skill enhancement, with an annual investment exceeding 10 billion rupees.
Some analysts say that Apple and Foxconn are still increasing their bets on India, insisting on de-Sinicizing.
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