Apple staff welcome customers into a new store in Beijing. Apple supplier Foxconn is increasingly ... [+]
Is Apple
Call it localization or regionalization, but it surely isn’t China-centric globalization anymore. Those days are slowly coming to an end.
Just as Californians convinced the bulk of Americans to care where their food came from and to eat locally harvested foods and buy local meats, it is only a matter of time before a stickier buy local theme kicks in for other items, too — whether it’s sneakers or shoes, dumb phones or smart ones.
It’s not that Apple shouldn’t make phones in China. Why shouldn’t they? It has a big market in China to serve and China has the region’s best logistics to ship those phones throughout southeast Asia, central Asia and into parts of Russia.
But if you’re making phones for the Indian market, why not make them in India and put Indians to work? If you’re making them for the North American market, why not make them in North America?
Foxconn is moving in that directly, literally.
Young Liu, Foxconn chairman. (Photo by Mandy Cheng/AFP via Getty Images)
"No matter if it's India, Southeast Asia or the Americas, there will be a manufacturing ecosystem in each," Foxconn chairman Young Liu told investors on a conference call this week.
Whether or not export arbitrage for iPhones becomes a thing remains to be seen. Give it time.
The move out of China may have more to do with costs than shifting supply chain fundamentals on account of a three year old trade war. China has moved up the value chain on technology, and while the country has no shortage of hands willing to screw a motherboard into a Macbook, stricter regulations and higher wages are driving companies away, too. If multinationals corporations can find a similar labor force with decent logistics, in a low tax and low regulatory environment, they will go there. They already are — off to the Philippines, to Vietnam, to Indonesia, to Mexico.
Geopolitics are also providing a nudge for major companies like Foxconn. This is especially the case with items deemed essential for national security. Witness President Trump signing Executive Orders last week to bring manufacturing of pharmacological inputs used to make numerous drugs back to the U.S., among other things.
Taiwan Semiconductor is planning a $12 billion nanochip fabrication facility in the American southwest – no doubt thanks to some “carrot-dangling” from Washington, writes Matthew Hughes from enterprise technology news site The Register out of London. He also mentions the heavily incentivized Foxconn plant going up in Wisconsin that is costing that state a small fortune.
That’s the price to pay, sometimes, for competing with China.
Building factories to make widgets in China, whether in the outskirts of glitzy Shanghai, or somewhere in a third tier city no one outside of 10 miles of there has heard about, also costs governments there a pretty penny. Just as Wisconsin is reportedly doling out $3 billion to bring Foxconn to town, China does the same — actions that keep millions of Chinese in the job market, often at the expense of world labor markets who struggle to compete with a Chinese manufacturing system that is state of the art and modern, but also not market-based and not in it for the money. They are in it, in the most basic sense, for the labor.
Foxconn will be in it for the labor, too. Where they can find the logistics, the labor force, and the taxes that work for them — and a big, solid customer base nearby — they will go. Shipping everything from China is becoming a thing of yesteryear.
