Top iPhone Assembler Foxconn Expects To Move Further Away From China

Foxconn Technology Group, Apple’s main iPhone assembler, plans to split its manufacturing capacity between China and other countries. The shift will help Foxconn avoid tariffs from the ongoing trade war between China and the U.S. and keep prices competitive for clients, analysts say.

Foxconn Chairman Young Liu told an investor conference on Wednesday that the assembler would add factory capacity outside China, while citing India, Southeast Asia and the Americas as possible locations for the tech giant’s operations, Bloomberg reports.

A Foxconn spokesperson contacted Thursday described the shift as a geographic “split” in capacity but said the company had not forecast its ratio of sites in China compared to those in other countries. The proportion of Foxconn’s capacity outside China now stands at 30%, up from 25% in June 2019.

The company’s earlier statements were “directed at providing the thoughts of our management team on the latest macro developments impacting our company and the global consumer electronics industry,” Foxconn said.

Rising tensions have put tech companies at the center of a trade battle between the U.S. and China, disrupting supply chains and threatening their access to large markets.

The Taiwanese assembler, also known as Hon Hai Precision Industry, started “feasibility discussions for relocation” in 2018 or early 2019, says Brady Wang, an analyst in Taipei with Counterpoint Research. Almost all Taiwanese electronics contractors plan to avoid U.S. tariffs by setting up factories or increasing production capacity outside China, he says. That outflow began this year, Wang says, particularly into India and Vietnam.

Foxconn is planning a $1 billion expansion at a factory in southern India, according to various reports. It also aims to open a $10 billion display factory in the U.S. state of Wisconsin.

The company with presence in 16 countries today has pulled most of its server and networking equipment assembly business out of China since 2018. Dell, HP, Google and Tesla are other big-name clients of Foxconn.

A split in capacity between China and other countries could raise Foxconn’s costs but eventually increase revenue, Wang says. It would also make more “clear cut” the sourcing of parts, supplies and production across Foxconn’s business units, says Tracy Tsai, research vice president with Gartner in Taipei.

This week, Foxconn posted better-than-expected results for the second quarter. The Taipei-based company posted a net profit of about 22.9 billion New Taiwan dollars ($778 million), a jump of 34% from the same period last year. Revenue came in at NT$1.13 trillion, but Young warned that its sales next quarter will be down as Apple delays its iPhone launch.

Terry Gou, the richest man in Taiwan, founded Foxconn 45 years ago. He managed it largely on his own until stepping down last year to run a Taiwan presidential primary campaign that eventually flopped. Foxconn had grown over the decades to become the chief contractor for Apple, among other world IT brands.