admin A main supplier to Apple Inc. and other tech empires’ plans to split its supply chain between the Chinese market and the U.S., stating that China’s time as factory to the world is over because of the trade war. Hon Hai Precision Industry Co. Chairman Young Liu stated it’s gradually adding more capacity outside of China, the core base of production for gadgets from iPhones to Dell desktops and Nintendo Switches. The proportion outside the country is now at 30 percent, up from 25 percent last June.
That ratio will increase as Foxconn moves more manufacturing to Southeast Asia and other regions to avoid escalating tariffs on Chinese-made goods headed to U.S. markets, Liu told reporters after his company reported financial results.
“No matter if it’s India, Southeast Asia or the Americas, there will be a manufacturing ecosystem in each,” Liu said investors on a conference call, adding that while China will still play a main role in Foxconn’s manufacturing empire, the country’s “days as the world’s factory are done.”
Foxconn stated Thursday that, contrary to “inaccurate media reports,” management’s comments during the call did not refer to any specific companies, facilities or products, and were intended to reflect macroeconomic and industry trends.
Intensifying trade tensions between Washington and Beijing have pushed device manufacturers to diversify their production bases away from China, and Liu last year stated that Apple’s most prized product, the iPhone, can be made outside China if needed. The two nations remain in trade talks, but Liu’s comments confirm a rising expectation that the China-centric electronics supply chain will fragment over the longer term.
The Taiwanese company informed better-than-expected net income of NT$22.9 billion ($778 million) for the quarter ended in June, a period that saw increased demand for iPads and MacBooks. Revenue was NT$1.13 trillion, but Hon Hai told it expects its third-quarter sales will be down by double digits relative to 2019. Apple is expected to delay its iPhone launch this year.
The pandemic likely boosted iPad and Mac sales, even as Apple store closures weighed on iPhone sales, Apple CEO Tim Cook stated on July 31 after reporting quarterly revenue that crushed estimates.
Even as Apple outdid, Hon Hai’s other customers have managed less well. Hong Kong-listed subsidiary FIH Mobile Ltd. stated in its Aug. 7 earnings release that while Huawei Technologies Co.’s new phones have been popular in China, they missed expectations elsewhere following U.S. sanctions.
Chinese competitors are also posing a growing challenge. Local electronics titan Luxshare Precision Industry Co. is poised to become the first Chinese homegrown iPhone assembler after sealing a deal in July to buy an Apple handset production plant from Wistron Corp. While Hon Hai will keep assembly orders for premium iPhones, Luxshare will eat into the business for mid-to-entry-level Apple handsets, Fubon Securities analyst Arthur Liao wrote in a July 23 note.
Foxconn will work on its component business to maintain tech leadership and it also benefits from its long-term relationship with Apple, Liu stated in response to several analysts’ questions about Foxconn’s competitive strategy against the rising Chinese supplier.
Orders could be further affected after President Donald Trump allotted an executive order barring U.S. residents from doing business with Tencent Holdings Ltd.’s WeChat. Annual iPhone shipments could plunge 25%-30% if Apple is forced to remove the app from its app stores worldwide, TF International Securities analyst Kuo Ming-chi advised in an August 9 note.
Magazine 
