China is about to be dethroned from its long-standing hegemonic position of being the world’s factory. One of the major suppliers to Apple Inc and several other tech giants, Hon Hai Precision Industry Co., also known as Foxconn is going to diversify its supply chain between China and the US by moving parts of its production to South East Asian nations, says a report by Bloomberg. The iPhone assembler has cited the escalating trade war between China and the US, and the tariff being added to China made products headed to the US markets as the reason for diversifying its operations and moving out of China partially.
Chairman of the company, Young Liu said that although the company’s main base for production of iPhone, Dell desktops and Nintendo switches continues to be China,
the percentage of production capacity outside China is slowing being increased by the company. The production outside China has already undergone an increase from 25 percent to 30 percent since June. Liu added that the company plans to move more of its manufacturing to South East Asian region.
“No matter if it is India, South East Asia or the Americas, there will be a manufacturing ecosystem in each,” Liu said, adding that while China will still play a key role in Foxconn’s manufacturing empire, the country’s “days as the world’s factory are done.” The Taiwanese company recently reported considerable increase in profit in the June quarter owing to increase in demand for iPads and MacBooks.
Uprooting its China based operations, Foxconn is one of those assembly partners of Apple who are planning to move their production facilities to India and expand its presence in the country. When asked about the company’s competitiveness being challenged by entry of new players in the iPhone component manufacturing segment, especially in China, Liu said that the company continues to be the tech leader in the segment and also has a long-term partnership with Apple.
Meanwhile, there are several other companies that are looking to move their operations from China to India. Add to that the recent sentiment of boycotting Chinese products in India, which is forcing brands to take steps in that direction in order to avoid losing customers. “Several brands have increased talks to move their China production not just to India but also ASEAN nations,” said Rishab Soni, managing director at SSIPL Group, which manufactures for brands such as Puma, Asics, Lotto and Power.