In a Supply Chain Matters blog published in late June, we highlighted a report from Nikkei Asian Review indicating that global contract manufacturer Foxconn had reaffirmed plans to step up the provider’s investments in India and Taiwan this year as it redoubles efforts to diversify away from China amid the deepening rift between Beijing and Washington over trade and strategic technology developments. The report essentially highlighted remarks from the global contract manufacturing services provider’s Chairperson at the annual meeting of shareholders held at the time.

Consumer Electronics manufacturing

A year prior, at Foxconn’s first annual shareholders meeting, this provider told The Wall Street Journal that it was prepared to move production out of China if customers such as Apple required that move. In our Supply Chain Matters commentary related to this development, we made reference to a further move to shift production of previously announced Apple iPhone models to India.

Two months since that June report, Nikkei Asian Review reported this week (Paid subscription or metered view) that the globe’s largest contract manufacturer and Apple’s most important supplier said: “nearly one-third of its production capacity is now outside of China, a figure that will likely keep growing due to the “inevitabledecoupling of Chinese and American supply chains.”

Foxconn Chairman Young Liu reportedly told investors this week at a conference held in Taipei that: “The global trend toward a G2 [group of two] is inevitable. How to serve the two big markets is something that we’ve always been planning for.” Indicated was that in addition to an existing investment in the United States at a State of Wisconsin facility, the manufacturer has been increasing capacity in Southeast Asia including Vietnam, Mexico, Brazil, and India.  The report quantifies that production capacity located outside of China has moved to 30 percent since June of last year. With customers that include Cisco, Dell, Google, Hewlett Packard and others, reportedly the majority of server and networking related production is now part of this move to outside of China.

 

Broader Global Sourcing and Supply Network Resilience

In our prior Foxconn updates we have indicated our observations that with each passing week, contingency sourcing and supply segmentation moves remain active from a number of dimensions. These added indications likely reinforce such moves.

While smartphone and other high-tech devices destined for China’s vast consumer market can likely be sourced within the country, the indication seems rather succinct that more regional manufacturing options are being requested by rather influential high tech and consumer electronics design and manufacturing firms. Indeed, there are notions that tensions among the U.S. and China are perceived to be worsening, and for Taiwan based Foxconn to acknowledge such is a rather big deal.

With new reports indicating that China, in addition to Hong Kong, might be willing to ratchet-up political tensions with Taiwan, it seems as though high-tech supply networks are upping their risk mitigation and contingency strategies.

 

Bob Ferrari

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