4.2 Industrial relocation within China
4.2.4 Bohai Rim
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4.2.4 Bohai Rim
The Bohai Bay area is the region surrounding the Bohai Gulf in Northeast China. It includes the provinces Liaoning, Hebei, and Shandong and the important cities of Beijing, Tianjin, Shenyang, Yantai, Dalian, among others. Following the
“northward expansion” trend of development, at the beginning of the new century, Foxconn started a series of investments in the northeast regions of the Bohai Rim.
With a total investment over $1 billion in the past decade, the area now has a high concentration of Foxconn facilities. Foxconn’s investments in the Bohai region have clustered in Yantai (9 different companies), with other popular regions for investment being, Beijing (4), Tianjin (4) and Qinghuangdao (3). Foxconn’s investments in production facilities between 2002 and 2014 in the Bohai Region are listed in Appendix 3.
During the period 2002-2013, a total of $1.2 billion was invested in the region, with 1 billion USD invested indirectly via overseas subsidiaries and 260 million USD invested directly. These investments financed 29 projects in nine different cities:
Beijing, Langfang, Tianjin, Qinhuangdao, Yantai, Dalian, Yingkou, Shenyang and Changchun. The data shows that although Foxconn started investing in this area in early 2000s, more than 50% of the budget refers to the 2006-2008 period and that the majority flowed to Yantai, Tianjin and Beijing.
Most of Foxconn’s facilities in the area are involved in the manufacturing and marketing of Foxconn’s core items such as phones, electronic components and
Figure 22: Investments in the Bohai region (USD) Figure 21: Geographical
distribution of Foxconn
investments in the Bohai region
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computer cases. That being said, investments in Yantai, Beijing, Tianjin, which constitute the mobile phone production bases of Foxconn International Holdings in North China (TEDA, 2015a), need further analysis.
4.2.4.1 Beijing
Within the Bohai area, the first city Foxconn invested has been Beijing.
Beijing is the capital of the People's Republic of China and, with fifty-eight branches out of a total of 879 (MOE, 2013, May 3), has the highest concentration of universities in the country. The cultural nature and tradition of the city was further stressed by the “State Council's Official Response to Overall Planning of Tianjin”
published in 2006. In it, Beijing was positioned as “China's capital, metropolis, culturally well-known city and suitable city for residence” (People’s Daily Online, 2006, August 10). The document mentions “suitable city for residence” for the first time and does not refer to Beijing as a so-called economic center. Despite the State Council's position and the fact that manpower, land cost and environmental pressure have been relatively higher in Beijing compared to other Chinese cities, Beijing still has much to offer to entrepreneurs who desire to invest in northern China, especially in higher-value added manufacturing and in the tertiary sector. In addition to the well-developed network of infrastructure, Beijing can offer a broad spectrum of developmental areas, a Science Park and an EPZ. Among those, the most important are the Beijing Economic and Technological Development Zone (BDA), the Beijing Tianzhu Export Processing Area and the Zhongguancun Science Park (ZSP) (Bjinvest, 2014). Of these, the last one deserves further explanation.
Zhongguancun Science Park is located in the northwestern part of Beijing in Haidian District, and is China’s first state-level hi-tech industrial park. Known as the Silicon Valley of China, ZSP has a high concentration of scientific and technological institutions and research resources and has emerged as the largest software development center in the country (Bjinvest, 2014).
According to the information the author retrieved, Beijing’s government has not signed any bilateral agreement with Foxconn to pull them into the region, however Foxconn still considered the area to be attractive as early as 2001. We can understand the motivation behind Foxconn’s choice by looking at the main activity of invested factories. The first facility to be invested, “Foxconn Precision Component (Beijing) Co., Ltd.” is involved in the manufacture and marketing of
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telecommunication cases computer cases, micro ribbon connectors for terminals. The same kind of business is that of “Futaijing Precision Electronics (Beijing) Co., Ltd.”.
Both are located in the Economic and Technological Development Zone.
In Zhongguancun Science Park, Foxconn further invested in two companies that deal with higher value-added
operations; “Beijing Sinya Online Information Technology Co., Ltd.”
provides software and technology services, and “Innovation (Beijing) Software Development Co., Ltd” designs and publishes computer software. The first one was invested in 2007 and the second one in 2010. These kinds of businesses are encouraged by state
industrial policies and the development of the BDA.
Determined to exploit Beijing’s most attractive sectors, Foxconn concentrated a total amount of $135 million on the above-mentioned four facilities by seven financial operations. The data I gathered also show that the investments are concentrated in the 2006-2008 period. Even though there may be no connection, it is noteworthy that 2006 is also the year of the launch of Beijing’s 11th Five-Year Plan (2006-2010), which in line with the national policy (Ling, 2006), was aiming at further developing six functional areas for high-end industries including BDA and ZSP (eBeijing, 2006).
4.2.4.2 Tianjin
Tianjin is a municipality located 130 kilometers southeast of Beijing, along the coast of the Bohai Bay. Since the city enjoys the advantages of good geographical location, a developed industrial layout and strong R&D capability, it has long been viewed as an important economic center and important sea access for the northern provinces. In line with the idea that the development of Tianjin would not only boost the growth of the Bohai rim but also that of the northern region, the “State Council's Official Response to Overall Planning of Tianjin” released on August 8, 2006, stated that Tianjin was ready to became the economic center of Bohai-Sea Region, easing the burden of Beijing (People’s Daily Online, 2006, August 10). The first step in this
Figure 23: Foxconn investments
in Beijing (USD)
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direction was made with the establishment of Tianjin Binhai New Area (TBNA).
TBNA consists of nine functional zones namely Advanced Manufacturing Zone, Airport-based Industrial Zone, Binhai High-tech Industrial Development Zone, Seaport-based Industrial Zone, Nangang Industrial Zone, Seaport Logistics Zone, Coastal Leisure & Tourism Zone, Sino-Singapore Tianjin Eco-City and Central Business District. Tianjin Port, whose throughput ranks 5th in the world, is also located in the area (Wu, 2009) (TEDA, 2015a).
Within the planned area of 2,270 square kilometers, nearly twice the size of Shanghai Pudong, key industries include the petrochemical industry, automobiles, metallurgy, biotechnology, new energy, modern medicine environment, and most relevant for Foxconn, telecommunications and mobile phones. In 2006, Tianjin produced more than 100 million units of mobile phones, an increase of 48% from the previous year. During the same year, Samsung invested US$179 million in building its largest overseas mobile phone production and development base in the municipality. Motorola also has a major production base located in the city (China Knowledge Online, 2006).
Foxconn settled down in Binhai in 2005 and engaged in the production and sales of mobile phone components with
annual sales of about $1 billion (TEDA, 2015b). Similar to Beijing, Tianjin hosts only four Foxconn’s invested facilities, namely
“Foxconn (TianJin) Precision Industry Co., Ltd.”, “Hongfujin Precision Electronics (Tianjin) Co., Ltd”, “Tianjin Funayuanchuang Technology Co. Ltd.” and “Foxconn (Tian Jin) Technology Co., Ltd.” which received a total
of $204.038.860 between 2005 and 2012. We can say that by investing in Tianjin Foxconn aimed at shortening its clients’ supply chain by being close to them and also clustering together with other high-tech firms in order to enjoy the advantaged offered by the creation of an industrial cluster. That being said, it is clear that a central role in convincing Foxconn to invest in Tianjin was also played by the central and local government.
Figure 24: Foxconn
investments in Tianjin (USD)
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4.2.4.3 Yantai
Within the Bohai area, the most important city for Foxconn has been Yantai, a prefecture-level city in northeastern Shandong which has long been famous for its wine production and tourism, but in recent years has also developed several high-end industries. Yantai ranks fourth in the ranking of Foxconn’s most invested cities after Shenzhen, Kunshan and Huaian, and according to my data, its nine Foxconn facilities have received a total $420.238.426 investment between 2004 and 2013 with a peak of $187 million in 2007.
In Yantai, Foxconn has set up its own industrial park and within it, engages in the production and marketing of a wide range of goods ranging from the classic telecommunication peripherals, computer components and print circuit board components, to the new numeric control machine tools, auto digital signal process devices and monitoring devices. These
high-tech devices are manufactured in “Yantai Jiray Electronic Technology Co., Ltd.”
and “Yantai Zheng Yi Precision Electronic Co., Ltd.”.
Why did Foxconn decide to invest almost half of a billion USD in Yantai?
Besides it is Guo’s mother’s hometown, the answer might sound too simplistic, but it is because the area was well endowed of strong pulling features. Located near South Korea and Japan, investors from these countries consider it a good place to invest in in order to supply their own domestic markets. Nearly 1,200 foreign companies from 43 countries and regions have invested in the Yantai ETDZ, including over 50 Fortune 500 enterprises. The major investors are General Motors, Henkel, Hyundai Motor, LG, Foxconn, Daewoo, Denso, Toyota Tsusho and Asahi Kasei Industry (China Knowledge Online, 2013b). Yantai offers a 10 km2 Economic and Technological Development Zone set up by the State Council in 1984, a 226 km2 Export Processing Zone approved in September 2003, and a seaport located in Zhifu Bay, all well connected through a good transportation network of highways and railroads. But the Yantai government didn’t just set a fertile environment for the development of a high-tech cluster conducive to Foxconn investment. As already said
Figure 25: Foxconn
investments in Yantai (USD)
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in 2013, Yantai officials also provided Foxconn with vocational high schools students to work in the city plant.
4.2.4.4 Changchun and Shenyang
Even though Changchun and Shenyang have received only small investments, the main object of the investee capitals makes them quite relevant for our discussion.
Shenyang was invested first. In 2007, almost US$70 million were put in “Foxconn (Shenyang) precision Industry Co., Ltd.”, a company manufacturing numeric control machine tool.
Changchun instead was invested for the first time in 2013. Here “Changchun Leiguan Environmental Plastic Products Co., Ltd.” manufactures articles for the conveyance or packing of goods, and “Ying Tai Environmental Technology Ltd.”
together with “Xiang Tai Environmental Technology Ltd.” deal with the manufacture of degradable plastic resin.
These investments are certainly in line with Foxconn’s general shift from labor-intensive to capital-intensive products.