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subsidiary in Chengdu as late as 2011 and have opened another 3 plants since. These are positioned in the Chengdu High-Tech Comprehensive Zone and the Chengdu Import/Export Processing Zone. This is the main location for the production of Apple iPads. Outside the two major areas of central China, special discussion is necessary for “Liuzhou Antec Fangshen Electric System Co., Ltd”. Located in the city of Liuzhou, Guangxi province, the company manufactures and markets automobiles components.
4.3 Relocation outside China
As Foxconn evolved from a small business to a multinational corporation, it has also started a territorial diversification strategy by looking at investment opportunities outside China. As shown in figure 30, this is a recent development that started in the early 2000s and is still underway.
According to Kojima (1973) there are three main types of direct investments; natural resource oriented, labor oriented and market oriented. In line with this thesis, Foxconn’s global expansion is based on three needs. First the need of labor, both high skilled for its high-end segments, and cheap for the labor-intensive low-end segments;
then the need of entering foreign markets, and finally the need of being close to clients and suppliers.
Figure 30: Foxconn Technology Group global distribution (fu shi kang ke ji ji tuan quan qiu bu ju, 富士康科技集團全球佈局)
(Foxconn, 2009)
Australia: 2005 Czech Republic: 2000
Hungary: 2007 Slovakia: 2010
Turkey: 2010 Mexico: 2004
USA: 2006
Brazil: 2005
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Even though Foxconn investments outside China have an ultimate purpose, through a clever selection of the plant location, each one of them can fulfill more than one need.
Foxconn has already invested in the Unites States to exploit the country’s vast high skilled labor pool. As stated by Gou, “Automation, software and technology innovation will be our key focus in the U.S. in the coming few years” (Wingfield, 2013). In 2013 Foxconn announced a $30 million investment in Pennsylvania along with a $10 million in a venture with Carnegie Mellon University for research in robotics and manufacturing (Starner, 2014, January). Besides exploiting American skilled labor, establishing a plant in Indianapolis (2006), the US transportation hub (airport, rail, FedEx distribution center) in the Midwest, the company is now also able to reach 70% of US population within 48 hours by ground transit (Foxconn, 2015).
When talking about investments in the U.S., Gou also stated “We won’t be migrating Chinese production lines, but creating high-precision, high-tech, high value-added manufacturing in the U.S for future technology trends” (Wingfield, 2013). Due to rising labor costs, Foxconn may however also move some manufacturing out of China. As shown earlier, Foxconn has been moving production west and inland within China. As wages continue to rise across the country the next step to cut down labor cost could be to move away from China to countries with lower production costs such as Vietnam or Indonesia. Reports indicate that Foxconn is ready for large investments in Indonesia. According to Indonesian trade minister Gita Wirjawan, Foxconn is ready to invest as much as $5-10 billion over a ten-year period. The investment is not confirmed, but Gou has been quoted that Indonesia has the potential to replace China as the world manufacturing hub in the future (Supriata, 2012).
Other investments are specifically aiming at foreign markets and at shortening the supply chain. Investing in some Eastern European countries, Foxconn met exactly these needs. When Czech Republic introduced policies meant to attract foreign investment, Foxconn took the occasion to invest in Pardubice in 2000, with the promise of ten years tax exemption. Later, in 2007, it further opened another factory in Kutna Hora, and now operates several factories that manufacture different products among which televisions, laptop and desktop computers, servers, and digital cameras.
Producing in Czech Republic Foxconn can first of all avoid EU’s high tariff barriers, such as the 14-percent import duty on LCD televisions (Her, 2006, December 29).
Given the strategic location of the country at the center of Europe, its well-developed
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communication infrastructures, and an optimal labor-cost/labor-productivity ratio (JILL’s, 2014), Foxconn can also produce at low cost and deliver products within two days of receipt of customers’ order.
In the same area, and for the same reason, Foxconn has also invested in Hungary (2007 in Komárom) and Slovakia (2010 in Nitra). The Slovakian plant is the biggest LCD TVs supplier for the whole European market (Foxconn, 2015a)
Moving south to the furthest reaches of the European continent, in 2010, Foxconn also established a plant in Turkey. Foxconn’s Turkish factory is located 100km west of Istanbul within the European Free Zone12, close to Ç orlu in western Turkey. From a logistics point of view, this is a very strategic position. The Free Trade Zone is located right next to the Pan European Corridor IV13 and within 125 km to international airport and seaport. From this location, Foxconn is ready to serve Europe, Middle East and Africa (Foxconn, 2014).
A similar strategic role is played by the Mexican plant. Built in 2004 in Juarez, few kilometers away from the U.S. border, the city is a gateway to Latin America and to the United States. The importance of entering the Latin American market is also shown by the investments in Brazil, one of the five major emerging national economies (BRICS). In Brazil, Foxconn started its activities in 2005, in Manaus, with the manufacture of mobile phones. The following years, in 2006, the Company opened another factory in Indaiatuba also focused on the manufacturing of mobile devices, and in March 2007, the Company opened its largest plant in the country, in Jundiaí. The site was developed especially for the manufacture of computers, notebooks and netbooks, motherboards apart from such equipment. Later, in 2011, the company opened another plant in the city, geared specifically for the assembly of smartphones and tablets (Foxconn, 2015b).
Despite Foxconn global relocation, the company keeps on investing in Taiwan.
In the country, the company is reportedly investing NT$70-$80 billion (US$2.2-2.5 billion) in Kaohsiung to set up a flat panel factory and set up a research and development center in New Taipei City's Tucheng district (Phillips, 2015, March 01).
Both the factory producing high added-value products and the R&D center are in line
12 The European Free Zone is a Turkish industrial project laid on 8 August 1998. The official opening was made by Prime Minister Erdoğan in 2003 (EFZ, 2015). Investors here can benefit from various tax breaks.
13 The Corridor IV is one of the Pan-European transport corridors. It runs between Germany and Turkey, intersecting also Czech Republic, Hungary, Romania and Greece (UN, 2006).
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with the process of transformation and industrial upgrading orchestrated by Guo Tai Ming.