Electronics Giant Foxconn Grows Operations Outside of China

What Happened?

Taiwanese electronics manufacturer Foxconn recently closed a $33 million deal to purchase ten acres of land near Houston, Texas to expand its American based operations.

Foxconn already owns a large warehouse near the newly acquired acreage in Texas. The company says the new land will be used to grow its artificial intelligence business.

The Texas acquisition is part of a global pattern of growth for Foxconn. It has also made new investments in land and infrastructure in India, Thailand, and Mexico.

Why it Matters

John Liu and Mehgan Tobin reported for the New York Times, ‘The core of Foxconn’s business is in Zhengzhou, the capital of Henan province in central China, known as “iPhone City.” That’s where a network of suppliers, infrastructure and factories, and sometimes as many as 250,000 Foxconn employees, manufacture most of the world’s iPhones for Apple.’

In recent years the company has made several investments outside the core location in China. Many analysts believe the moves are intended to diversify Foxconn operations on a global scale.

According to the Wall Street Journal, ‘Over the past two years, Foxconn has spent millions of dollars building up its operations around the world to lessen its dependence on China.’

But the reason for Foxconn’s global expansion could be more economic than geopolitical. Sales of iPhones have decreased in China, and the electronics giant may also be trying to lessen its dependence on Apple.

Foxconn has begun to expand operations beyond smartphones and into the production of electric cars. It’s a risky move since the market for electric car manufacturers in China is already so crowded.

Foxconn will face a more competitive landscape abroad than in China. China has long favored Foxconn with government backed infrastructure and investments, giving the company an edge over competitors in China’s electronics manufacturing market.

How it Affects You

The incoming Trump Administration has signaled plans to increase tariffs on goods made in China. This would directly impact products made there by Foxconn.

If those plans are implemented, it could drive Foxconn to increase investments outside China to offset potential losses or increased costs of doing business.

Foxconn has made previous big investments abroad that failed to deliver the promised results. Major projects in Brazil, Indonesia, and Wisconsin either did not reach completion, went underfunded, or both.

The Wisconsin deal, which involved the much-touted production of a major new manufacturing center, was lauded by President Trump during his first term. But the failure of Foxconn to complete production of the proposed new plant turned the project into a political controversy.

The investments outside China by Foxconn indicate a willingness to take risks, something the company hopes will provide an edge over competitors globally. Multinational companies always have to adjust to changing political and regulatory realities.

In the case of Foxconn, it isn’t waiting for the new Trump Administration to take over before to begin the process of preparing for future changes.