Taiwan’s Foxconn Looks to Diversify Manufacturing Further Away from China

Taiwanese contract manufacturer Foxconn said on Wednesday it plans to further ramp up manufacturing outside China, as the company, which is best known as the assembler of Apple’s iPhones, tries to attract automakers to its contract manufacturing business, while reporting weaker demand for consumer electronics. Foxconn, which assembles around 70% of iPhones worldwide, has been diversifying manufacturing away from China, where the strict Covid restrictions last year disrupted operations at its biggest iPhone plant. The company also seeks to avoid a potential hit to its business from mounting trade tensions between Beijing and Washington.

“It is customer demand that guides our considerations on how to deploy our production capacity in the ICT field,” Foxconn Chairman Liu said, referring to information and communications technology.

He said expansion was needed in countries such as the U.S., Vietnam, India, Mexico and China, “in response to customer and supply chain adjustments”.

While confirming that currently about 70% of Foxconn’s revenue is derived from China made products, Liu said the proportion of overseas region will continue to increase.

The world’s largest contract electronics maker expected revenue for the first quarter and full year to be flat, as weak demand for consumer electronics would be offset by significant growth in computing, cloud, networking and component products.

More than half of Foxconn’s revenue comes from consumer electronics.

“We maintain a relatively conservative view towards the smart consumer electronics and think they might decline slightly,” Liu said, pointing to factors including last year’s high base as well as inflation and the slowing global economy.

Last November, Beijing’s curbs to control Covid-19 prompted thousand of workers from Foxconn’s massive Zhengzhou factory to leave, disrupting production ahead of the holiday seasons in the United States and China.

Foxconn has been looking to replicate its success at consumer electronics with electric vehicles. The company said it was both approaching and being approached by many automakers.

“Foxconn will actively expand its EV business in North America and work more comprehensively with traditional and start-up car makers,” Liu said.

The Taiwanese company has acquired the former General Motor plant in Lordstown, Ohio and has also hired a former Nissan executive to lead its efforts in EV business expansion.

Liu said revenue from EV components is expected to rise sharply to between $1.5 billion and $3 billion this year from $600 million last year. In Ohio, Foxconn will focus on battery packs for EVs, while Wisconsin will produce energy storage system (ESS) battery cells and battery packs, he said.

In separate news, Foxconn has also won an order from Apple for the production of AirPods and plans to build a factory in India to produce the wireless headphones. This deal will see Foxconn to become an AirPod supplier for the first time, while underlining its efforts to diversify production away from China.

Foxconn is expected to invest more than $200 million in the new India AirPod plant in the southern Indian state of Telangana. It wasn’t immediately clear how much the AirPod order would be worth.

Foxconn officials had debated internally for months about whether to assemble AirPods due to lower profit margins, but ultimately decided to go ahead with the deal to “reinforce engagement” with Apple.

The decision to set up production in India was requested by Apple.

A subsidiary, Foxconn Interconnect Technology, plans to start construction of a manufacturing facility in Telangana in the second half of this year and begin production by the end of 2024 at the earliest.

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