Why Foxconn is opening a plant in the USA

in busy •  4 months ago

Foxconn is a famous Taiwanese contract manufacturer - that is, companies like Apple, Sony, Nintendo and others design products and then contract Foxconn to actually manufacture them.

Foxconn was one of the first to exploit China's entry into the World Trade Organisation in 2000, opening plants in China to allow it exploit cheap Chinese labour to make everything under the sun. Chinese labour benefitted to be sure (they had jobs where previously they were unemployed), but the profits went to Foxconn in Taiwan (and to Apple and others for designing and marketing the products).

Which means Foxconn has no loyalty to China, they are loyal only to themselves (and Taiwan) and will go anywhere to make a profit.

In recent years, as Chinese wages have been rising, they have been opening plants in Brazil, Malaysia, Mexico, Turkey - anywhere where labour is cheap.

Faced with Trump's tariffs on China, their strategy is two fold. a) find somewhere else they can manufacture iphones etc and b) open a plant in the USA to show Trump they are bringing jobs to America.

Which is why they broke ground on a new factory in Mount Pleasant, Wisconcin, for a flat screen factory. They even managed to get a subsidy from the state of Wisconcin of $250 million for 15 years.

The Chinese should be worried. The Foxconn executives are smart - and they own the manfacturing expertise that has benefitted China to date. People gush about "Chinese manufacturing expertise" but it is actually Foxconn manufacturing expertise, and they can move it anywhere they want. The workers are just cogs in a platform Foxconn controls and they're replacable. Foxconn are in talks with India to move iPhone manufacturing there.

My guess is that they'll spread all their manufacturing plants across the globe to minimise the risk of any one country getting such a large trade surplus with the US that they come onto Trump's radar. The only way China can stop them is to invade Taiwan - and that's unlikely as long as the Americans have bases in nearby Japan and Korea.

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