Foxconn India to increase capital to expand factory Apple mobile phone supply chain differentiation?

“I’ve heard the news, and if Foxconn asks for a transfer, the company will respond in a timely manner,” he said on July 15, when a reporter, as an investor, called Anjie Technology’s secretary-general to ask if he had been informed of Foxconn’s $1 billion expansion of its Indian plant. Anjie Technology is Apple’s mobile phone components supplier, the main customer is Foxconn.

Foxconn India to increase capital to expand factory Apple mobile phone supply chain differentiation?

On July 11th, at Apple’s request, Foxconn plans to invest $1 billion to expand apple phone foundry in India, Reuters reported.

Foxconn, which has millions of workers, known as the “World Factory”, responded to the news of the expansion of its Indian plant on July 13 by saying that Apple had not yet responded to any market rumors about existing and potential customers, products and supply chain partners.

Apple is in a critical period of assembly for the new iPhone 12. The shift in manufacturing to south-central And South Asian countries, such as India, has long since begun, but the outbreak and uncertainty in U.S.-China relations have forced Apple and Foxconn to speed up the process, said Zhai Yan, director of wireless smartphone services at Strat-egy Anslytics.

Behind Foxconn and Apple is a huge mobile supply chain rooted in China, and if the next two companies invest more in India, challenges and risks will go hand in for Chinese supply chain companies.

In the field of consumer electronics, capacity, scale often determines whether to obtain product orders, in the smartphone industry, terminal manufacturers shipped hundreds of millions of units, customers often need to dock with a number of suppliers to meet production demand, increased customer communication, management and other costs. In the mobile phone’s huge supply chain, as a parts company, to maximize production capacity, close to the factory.

It’s also a critical time for Anjie Technologies, with Apple’s iPhone 12 coming up and running ready, and the agency expects the company’s feature parts to start around late July. For a company with a market capitalisation of only $10 billion, the layout overseas is a big strategic shift. “Whether or not to migrate mainly depends on the customer order business, whether we need to go there to produce, and what products to produce,” said Anjie Technology Secretary.

Another long-term supply of Apple mobile phone components of the listed company Dong told reporters on July 16, is often the customer project forced suppliers to build factories overseas, and the company has visited Southeast Asian countries, but is not suitable for investment in the construction of the factory conclusions.

Wu Yixuan, senior endpoint analyst at Strategy Analytics China, says trade frictions between the U.S. and China are causing Apple and Foxconn to reassess their reliance on Chinese manufacturing. China’s supply chain manufacturers in Southeast Asia to build factories, labor efficiency, business environment, political risks, industrial support, etc. are all need to be solved, and cross-cultural management itself also has challenges.

Capacity differentiation.

Foxconn’s factories are mainly located in Shenzhen, Zhengzhou, Yantai and Chengdu, China, and rumours of expansion are not the first to come out, with Foxconn having previously built plants in India serving Apple, Xiaomi and Finnish company HMD, but India is not a key area of Foxconn’s production capacity.

Mr Wu said $1bn was probably the company’s biggest investment to date in India, but it was still relatively small compared with Foxconn’s volume in China. A more intuitive example is the news that the investment will create 6,000 jobs in India over the next three years. Foxconn’s Henan plant in China, on the other hand, had 180,000 jobs at the beginning of March 2020 alone.

Apple is one of Foxconn’s biggest customers, and the company will release its new iPhone 12 in September 2020, when it is due to launch. Sun Yanxuan, president of the First Mobile Industry Research Institute, said Apple is now in a critical period of mobile phone assembly, requiring suppliers to shift capacity, and in the short term, Apple is to avoid the risks posed by the Sino-US trade war.

In May, the U.S. again revised new export control rules against China, exacerbating the anti-globalization of the electronic supply chain since the U.S.-China trade friction, and apple’s majority of mobile phone component suppliers are in China, the company’s official website listed Chinese suppliers, including Beijing Oriental, Ofeyguang, Xinwanda and other listed companies.

In the long run, mr. Sun says, splitting capacity into Southeast Asia, such as India, is an inevitable trend for both Apple and Foxconn. U.S. high-tech companies have been working to reduce production costs, as labor costs directly determine the price of mobile phone contracts, and U.S. companies are shifting capacity to lower labor-cost areas such as India as Labor costs rise. In June 2020, Foxconn and Weitron, Two of Apple’s major contract manufacturers in India, applied for incentives from local governments, according to media reports.

Foxconn India to increase capital to expand factory Apple mobile phone supply chain differentiation?

Supply chain transfer.

News of Foxconn’s Indian plant began to ferment on July 11, and on July 15th, Anjie Technology’s director-general said, “The company had plans to invest in India, and had previously done a study in India, whether the relocation mainly looked at customer orders business, whether we need to go there to produce, and what products to produce.”

Anjie Technology, which has long produced functional devices for consumer electronics such as mobile phones, has been deployed overseas for years, and its factories in Thailand are still under construction during the outbreak, and Vietnam’s goods have not stopped delivering.

Dong, another listed company in Apple’s supply chain, told reporters on July 16 that he was “concerned about the news.” From the company’s own point of view, there is no need for overseas expansion, often customer projects forced suppliers to build factories overseas. The current situation is not just for us, but will also affect a range of consumer electronics terminal companies.”

Anjie Technology Director said that in recent years, the company began to lay out Southeast Asia, first in Thailand to build factories, and then because some of the goods exported to Vietnam, the company also participated in the local vietnamese companies, and try to explore the business environment in Vietnam.

In the past two years, Supply chain companies such as Helitai, Shentianma A, Ori tech, Huaxing Optoelectronics and so on have been actively laying out India.

Wu pointed out that in the process of migration, Chinese companies with large capital, overseas operation experience and higher products in the cost of mobile phone materials will be more actively followed. These companies are more resilient to risk, have more experience in globalization, and have more business momentum.

In terms of their own development, companies are also migrating in search of lower labor costs. Manufacturing costs are usually raw materials, manufacturing costs, labor costs, the above-mentioned listed company Secretary told reporters that in the past two years, labor costs are getting higher and higher, the company’s director of the Triangle region, labor costs rise faster.

China’s social labor security system has been continuously improved, but also to a certain extent to improve China’s labor costs. By contrast, India and other Southeast Asian countries are in the midst of a demographic dividend, and labour costs are widening with China, and their advantages in attracting low-end manufacturing are further apparent.

In Chinese mainland, Mr Sun said, manufacturing tends to pay high costs in the early stages, saving manpower by increasing factory automation, while in India the cost of labour is lower, the factory requires less automation, the same capacity, and the scale of investment required is smaller.

Risks and challenges.

“China does not have the industrial chain advantages that India and other countries can replicate and surpass in a short period of time, ” says Mr Gong.

Dong, a listed company that has long supplied Apple’s mobile phone components, told reporters that the company had visited Southeast Asian countries and had communicated with Chinese entrepreneurs who had built factories there, and had concluded that it was not suitable for past investments and factories.

The secretary said that the company has been delivering goods to Southeast Asia, Foxconn last year part of the production capacity moved to India, the company has opened up the Indian factory logistics and other channels, and into a new country, will face a lot of risks, the company after communication, found that some enterprises in Southeast Asia appeared “water and soil disobedience.”

On the one hand, according to the director, local workers are more difficult to manage and integrate than Chinese workers, based on cultural differences, and some companies eventually have to send Chinese workers to the past, and on the other hand, overseas investment, albeit geographically closer to customers, is difficult to integrate local logistics and supply systems. China, by contrast, is very mature in these areas.

Now the development of overseas outbreaks, but also to the sea enterprises put forward new requirements. The situation along the Border between China and India and changes in international relations have also created uncertainty for Chinese companies investing in India, which has introduced incentives for overseas manufacturing investments and has repeatedly announced increases in import tariffs on electronics, toys and small appliances. It was also reported recently that India has banned 59 apps nationwide, including short video and social media, all developed by Chinese companies.