
Foxconn Expands Operations in India, Vietnam Amid Trade Tensions - ryansmccoy
https://www.bloombergquint.com/business/hon-hai-expands-operations-in-india-vietnam-amid-trade-tensions#gs.pXdcbNaX
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potatofarmer45
It's true at this current time, China is the best ecosystem to manufacture
electronics. Moving anywhere will incur a higher cost but this higher cost is
temporary.

This is econ 101. Moving now is pricier in the short run, but the investment,
particularly in India, means that there will be a new ecosystem being built
that will eventually provide the same costs and availability as manufactured
in China without having to deal with the forced tech transfers, censorship,
nationalistic boycotts, and a country that is increasingly hostile to
democratic values and international norms.

~~~
rohansingh
Unfortunately I don't think it's that straightforward, specifically for moving
development to India. One of the major issues for manufacturing in India is
the availability of reliable electricity.

Even though India now has a net surplus of electric generation, there are
systemic problems with the electric grid. Some of them are due to poor
infrastructure, others due to theft or corruption. But the takeaway is that a
factory in India just can't run for 24 hours a day the way it can in China.

This is not likely to change in the foreseeable future, even with sustained
international investment. There are a ton of constituencies in India that make
fixing these kinds of issues much more complicated than in China. So while a
company like Foxconn may be able to setup a factory and use their considerable
resources to make it work, I don't think we're likely to see the kind of
ecosystem pop up that you see in Shenzhen.

~~~
potatofarmer45
I recall talking to an old hand at Li & Fung (they're the largest contract
manufacturing company in the world) and he talks of the old days where
Shenzhen was literally a village with no factories, no paved roads, and no
electricity. When they wanted to manufacture textiles back then, they
literally had to build a factory from the ground up.

It's true India has a lot of issues. But the good thing about investments like
these is that it creates an opportunity for everyone involved to potentially
make a change for the better. This could be the start of a new series of
investment in manufacturing and the potential could batter enough heads
together to fix issues like electricity reliability especially if every has a
vested interest in making it work out.

I'm not saying it will definitely happen, but these are the sort of
gamechangers that could disrupt the status quo for the better.

~~~
btian
When was that? They may be exaggerating.

I was in Shenzhen in the early 90s, and there was already reliable
electricity, roads, ports etc., and those were not built by Li & Fung

~~~
blacksmith_tb
Here's a set of photos from 1980[1], Shenzhen looks pretty provincial at that
point.

1:
[https://www.flickr.com/photos/lwdemery/sets/7215761115407137...](https://www.flickr.com/photos/lwdemery/sets/72157611154071370/)

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ktta
$213.5 million - Indian Unit - for “long-term investment”

$16.5 million - Vietnamese Unit - "for operations and sales"

Easy to see where the major investment is.

I see this is as a clear intent to start putting roots in the Indian market,
especially since regulations for international phone imports in India are
sometimes prohibitive. Though this move isn't to manufacture iPhones _right
now_ , they might be making a strategic move to be appealing to Apple, to
produce more phones (a future cheap - XR like version maybe?) in India.

That would be in addition to the production already in place in India for some
iPhones.

Apple still has the brand awareness in India. The iconic Apple logo's power
has yet to die. I'm not sure if they expect to sell high end iPhones about
$1000+ in volume, because they will fail.

One because that isn't cheap even for American blood. And the concept of
monthly payments for _a phone_ (price exceeding most two wheelers' prices -- a
popular mode of transport) won't sit well with people there, especially devoid
of all the carrier incentives in the states.

This is also following rumors from a bit ago -
[https://www.reuters.com/article/us-apple-india-
exclusive/exc...](https://www.reuters.com/article/us-apple-india-
exclusive/exclusive-foxconn-to-begin-assembling-top-end-apple-iphones-in-
india-in-2019-source-idUSKCN1OQ0M6)

~~~
chvid
I thought Apple's new facilities in India had something to do with India's
import restrictions:

"More iPhones made in India may also help Apple to hit a requirement of 30%
locally-made products in order to get government clearance to open Apple
Stores in the country."

[https://9to5mac.com/2018/12/27/iphones-made-in-
india/](https://9to5mac.com/2018/12/27/iphones-made-in-india/)

~~~
thisisit
Single brand retail chain ownership was restricted in India. A foreign entity
could only own up to 51% in a single brand retail chain. That has changed last
year in Jan 2018.

So, the article claiming the issue was 30% locally made products in 2016
doesn't seem right.

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thisisit
The investment in Indian unit has been long time coming. India has a strict
policy on imported phones. Xiaomi, which is nearly the market leader in India
has been doing it for a long time:

[https://www.indiatoday.in/technology/news/story/xiaomi-
now-h...](https://www.indiatoday.in/technology/news/story/xiaomi-now-
has-6-smartphone-manufacturing-plants-in-india-will-also-make-pcbas-
locally-1207974-2018-04-09)

Apple had lobbied hard against these rules but given that "Made in India"
platform had be one of the bedrock policies of Prime Minister Modi, this was
going to be an uphill battle.

That said, I might be pessimistic but I don't see this changing Apple's
fortunes in India.

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porpoisely
A perfect example of a non-news turned into news just to sell ads. Trade
tensions have nothing to do with foxconn or anyone's expansion in
vietnam/ASEAN or india. Multinational corporations have been moving to vietnam
and india for at least a decade now. Even chinese companies are moving to
vietnam and india as they look to exploit wage differences between china and
vietnam/asean/india.

From 2008 ( can't believe 2008 was 11 years ago ) ...

[https://money.cnn.com/2008/08/13/smallbusiness/the_new_china...](https://money.cnn.com/2008/08/13/smallbusiness/the_new_china.fsb/index.htm)

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dmode
$216mn in India and $16mn Vietnam seems really small investments in the grand
scheme of things. I doubt this indicates any material change in strategy other
than introducing some manufacturing in India

~~~
wang_li
Considering that a typical office worker in a large city in Vietnam makes
about $300/mo, that's like a $100 million investment in the US. Personally,
I'm happy to see such things happening as they should never have been so
centralized in a single country in the first place. This kind of investment
will also help grow the economies of India and Vietnam.

~~~
doanguyen
Compare to multi $B by some giant tech companies invested to VN recently, $16M
seems to be a tiny investment to me. [1]
[https://english.vietnamnet.vn/fms/special-
reports/174543/201...](https://english.vietnamnet.vn/fms/special-
reports/174543/2017-update-on-foreign-mega-investment-projects-in-
vietnam.html)

~~~
wang_li
That's quite a nice list. It makes me happy to see it as I have several close
friends in Vietnam.

------
entity345
It should be noted that Foxconn is a Chinese company in the larger sense of
the term (i.e. not PRC but ROC) and its founder's family is from Shanxi and
moved to follow the Nationalists (and so unsurprisingly he supports the KMT).

This is a business decision to expand and diversify but that also widens the
Chinese sphere of influence.

Its existing factory(ies) in India are very much used by China mainland
smartphone companies, which dominate the Indian market, for example...

------
thiago_fm
It is very hard to move that manufacturing process and supply chain out of
China without making it more pricey. China got everything they need.

It will take decades to those other countries fulfil what China is offering
_Today_

~~~
josu
From today's NYT article:

But when Apple began making the $3,000 computer in Austin, Tex., it struggled
to find enough screws... In China, Apple relied on factories that can produce
vast quantities of custom screws on short notice. In Texas, where they say
everything is bigger, it turned out the screw suppliers were not.

After creating months of delay, Apple ended up ordering the screws from China.
Eventually, Apple found a supplier in Texas that could produce 28,000 custom
screws, although they weren’t the exact screws needed nor in the right
quantity, according to the NYT. And they were delivered over 22 trips, often
in a Lexus driven by the maker’s owner.

[https://www.nytimes.com/2019/01/28/technology/iphones-
apple-...](https://www.nytimes.com/2019/01/28/technology/iphones-apple-china-
made.html)

~~~
mads
Not the enterprise way, I know, but if they really really wanted those screws
couldn't they just have gotten on an airplane and hand carried them back to
the manufacturing site? Probably could fit into a standard luggage container.

~~~
josu
They probably considered producing the screws part of the assembly process, so
they wanted to keep it local.

------
vba
Anecdotal, but I have a friend who manages a Thai manufacturering
business/factory (hard drives, optical mice, etc). He said a couple of US
companies moved their production out of China to them because of this trade
war spat, which presumably he’s happy about.

Now he’s asked me if I know any other US manufacturers who he could
manufacture for (guessing because I work in tech (though software) & live in
the states)

Would love to help him, but don’t really know how. Makes me realize I haven’t
networked enough.

------
gpm
You have to think that competition between countries is good for Apple here.

If all the tech is in China, there is no competition to have the most
favorable regulatory/taxation scheme. If there are two competitions, both have
an incentive to lure more manufacturing towards themselves.

------
bluedino
Good for Apple's future in India - getting those manufacturing jobs over there
is the first step to boosting incomes, eventually to the point of being able
to sell more iPhones there.

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crdrost
At least the Vietnam deal has been in process since early December [1] when
the Vietnamese government leaked it to the press.

What I am somewhat confused about, that maybe someone with more experience in
the import/export situation can enlighten me on, is whether the Wisconsin
plant was also some sort of move in this direction or not. What are the
advantages of trying to avoid a trade war by opening up facilities in some
neutral third country, as opposed to what they already have, which is
facilities in both "belligerent" countries? Is it that you're trying to route
Chinese-made products through some minor step in India or Vietnam in order to
say "no these really came from India/Vietnam, the tariff doesn't apply" and
maintain capacity? Or is the idea that they're ramping up enough capacity in
India/Vietnam/US that they no longer have to depend on Chinese policy in
general? Or something else?

[1] [https://www.reuters.com/article/us-foxconn-iphone-
vietnam/ap...](https://www.reuters.com/article/us-foxconn-iphone-
vietnam/apple-assembler-foxconn-considering-iphone-factory-in-vietnam-state-
media-idUSKBN1O3128)

~~~
ktta
I don't have any insider knowledge, but:

AFAIK the Wisconsin plant isn't going to happen. Even with the outrageous
incentives, it will be more expensive than China. Because it isn't simple
'price of math of man hours in China <= price of man hours in America +
savings in tariffs".

Set aside for a second the loss in margins due to absence of substantial
ecosystem of parts and other manufacturing companies. The worker situation and
protection in US would be a lot greater, which means 'less' productivity. So
that man hour equation is a lot more complicated. That is unless a large scale
automation of testing/validation effort kicks in. Again the technicians for
those machines will be double or triple digit more expensive in the US (the
rate at which income growth with skill rises in US is much higher - like most
developed countries).

That deal, in the first place, was made possible because of multitude of
reasons:

1\. Foxconn saving their butt in case a horrible trade war happens between US
and China, where the rumours were floating since way back before the tariffs
actually came in effect last year (ref: Youtube video of Trump saying China,
China, China)

2\. According to Point 1, if China-US trade wars do hurt their business, fish
for US tax incentives for minimal damage. Insurance.

3\. The local Wisconsin representatives trying to win over voter base saying
they will win jobs. These are the guys that screwed up. Just look at the scale
of those incentives.

But we can see today, a trade war won't happen, atleast at the scale that will
warrant an immediate start of manufacturing at the Wisconsin plant. This is
because Trump and Xi know trade wars kill GDP, and GDP, with all its flaws is
still the media's image of the long term economic growth.

> Is it that you're trying to route Chinese-made products through some minor
> step in India or Vietnam in order to say "no these really came from
> India/Vietnam, the tariff doesn't apply" and maintain capacity?

Possibly. India doesn't have the ecosystem for manufacturing many parts. So it
might be the final step of assembly. Because the tariffs will be for phones,
not for parts of phones. Though Indian government isn't stupid (I hope) enough
to get the short end of that stick.

~~~
housepapass
> But we can see today, a trade war won't happen

A trade war is already taking place. And will increase in scope very soon. And
no likelihood of it stopping

Commerce Secretary Wilbur Ross: The US is still 'miles and miles' from a trade
deal with China

[https://www.cnbc.com/2019/01/24/commerce-secretary-wilbur-
ro...](https://www.cnbc.com/2019/01/24/commerce-secretary-wilbur-ross-the-us-
is-miles-and-miles-from-a-trade-deal-with-china.html)

~~~
ktta
I'll go out on a limb and say that's all posturing. On both sides.

There is no way China will take the chance of losing its position as the
manufacturing hub. They might throw a couple punches, but will make up sooner
than a product release cycle.

------
julius_set
A subjective point but:

Chinese manufacturing work ethic > Indian manufacturing work ethic.

This will be disastrous short term.

~~~
pnw_hazor
Work ethic, really? How does being more susceptible to exploitation play into
that?

Indian workers can go on strike and vote in elections. Not so in Red China.

------
bofadeez
shows how weak china's position is as a global competitor. a tariff on goods
made in china will obviously cause manufacturers to move out of china. why
wouldn't they do that? the tariffs are actually very very very effective.

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mengibar10
If Trump's policy on putting tariff gets the support of the politicians
elected after him, I guess tariffs will only follow wherever the production
shifts to. This is not about only China (for now), this is about breaking the
back of competition. Isn't it?

