Apple EMS Foxconn in
China Return to Path with New 1bn Yen HQ in Henan
Apple’s
manufacturer in China bucked a trend of declining investment, but ‘complicated’
environment seen making slower growth ‘the new trend’
·
China’s
Henan province had managed to lock down a billion-yuan deal with Foxconn.
·
Foxconn
Technology, which is formally known as Hon Hai Precision Industry and owns the world’s
largest iPhone factory in Henan’s Zhengzhou.
·
Foreign
direct investment in China fell by 29.1 per cent in the first half of this year
to 498.91 billion yuan, compared with the same period last year.
·
Henan,
whose smartphone exports saw a nearly 50 per cent drop in the first half of 2024
from a year earlier.
·
Production
issues in late 2022, when a mass departure of workers due to coronavirus concerns
and violent protests over employee allowances disrupted Foxconn’s operations.
·
Apple
has moved part of its manufacturing capacity into markets such as Vietnam and India.
·
Pledges
to expedite the implementation of projects in areas such as electric vehicle manufacturing,
batteries, digital healthcare, and robotics industrial bases.
·
The
Economic Daily said that “even if Apple wanted to transfer 10 per cent of its production
capacity from China, it would take about eight years.”
·
The
need for China to reduce taxes and burdens for enterprises.
·
Foxconn,
together with Chinese electric vehicle leader BYD, have spurred a hiring boom
in Zhengzhou.
When
the news broke that China’s Henan province had managed to lock down a billion-yuan
deal with Foxconn – famously known as Apple’s manufacturer in China – a veritable
frenzy of excitement swept through the media and revved up market watchers desperate
for any sign of economic momentum.
But
just over three weeks since the announcement spurred boastings that “Foxconn is
back”, state media has stepped in with a message of prudence, looking to temper
expectations while still emphasising China’s leading role in the global supply chain.
The
Economic Daily said in a commentary on Friday that while panic should not ensue
when businesses retreat from the country, it was also important to avoid being “smug”
when they increase investments.
China’s
manufacturing industry “still has irreplaceable advantages” but “must also enhance
its core competitiveness and move up the value chain”, it said.
The
message came at a time when the world’s second-largest economy has been struggling
to invigorate investors both at home and abroad, as growth prospects have been weighed
down by challenges from geopolitical tensions and a series of structural internal
issues such as a property market crisis and shrinking workforce.
So,
when Foxconn Technology, which is formally known as Hon Hai Precision Industry and
owns the world’s largest iPhone factory in Henan’s Zhengzhou, announced plans to
spend 1 billion yuan (US$139 million) on a new headquarters in the city, the windfall
was widely interpreted as evidence of China’s persisting appeal amid a broader divestment
trend.
Foreign
direct investment in China fell by 29.1 per cent in the first half of this year
to 498.91 billion yuan, compared with the same period last year, according to Ministry
of Commerce figures.
Henan,
whose smartphone exports saw a nearly 50 per cent drop in the first half of 2024
from a year earlier, has been under pressure since Apple ramped up its diversification
efforts last year. The American tech giant’s move came after production issues in
late 2022, when a mass departure of workers due to coronavirus concerns and violent
protests over employee allowances disrupted Foxconn’s operations.
Amid
heightened geopolitical risks and enduring concerns over supply-chain disruptions,
Apple has moved part of its manufacturing capacity into markets such as Vietnam
and India.
Foxconn’s
agreement with the Henan government came as an uplifting surprise, with pledges
to expedite the implementation of projects in areas such as electric vehicle manufacturing,
batteries, digital healthcare, and robotics industrial bases.
Quoting
an unidentified research institute, the Economic Daily said that “even if Apple
wanted to transfer 10 per cent of its production capacity from China, it would take
about eight years.”
“The
reason,” it said, was that “China has a complete industrial-chain ecology, higher
production efficiency and more professional workers”.
However,
the publication also flagged the need for China to reduce taxes and burdens for
enterprises, improve the business environment, and beef up efforts in advanced manufacturing
to support its climb toward the high end of the value chain.
Lian
Ping, director general of the China Chief Economist Forum – a non-official, non-profit
platform for economic and financial analysis in China – said the market has been
hyper-focused on every move by multinationals operating in China, as the overall
environment now is “complicated and sensitive”.
“If
we had said there was not much evidence to be bearish on China in the past, now
– with weak domestic demand and the real estate slump – it’s hard to keep saying
that,” he said. “In the long run, slower growth will be the new trend, and it’s
impossible for foreign investment to keep coming at a high pace.”
Foxconn,
together with Chinese electric vehicle leader BYD, have spurred a hiring boom
in Zhengzhou this month as the peak period for iPhone shipments approaches and the
latter’s Zhengzhou operation – its largest contiguous vehicle-production base –
announced the launch of its second large-scale recruitment effort this year.
After
encouraging Foxconn to “remain confident in its investment in the region” during
July’s signing ceremony, Henan governor Wang Kai made a similar urge to BYD in an
August 3 meeting with its CEO, Wang Chuanfu, according
to an official readout.
“We
hope that BYD will give full play to its advantages in technology, talent and other
aspects, further increase its investment in Henan, and promote the establishment
of more emerging industries and high-quality projects in Henan,” he said.
BYD’s
Wang said the firm attaches great importance to its strategic cooperation with Henan
and vows to “make more contributions” to the high-quality economic and social development
of the province.