Foxconn Leads Way Diversifying Out of China

FYI

Apple supplier Foxconn is ahead of its competitors in diversifying its supply network in order to avoid getting caught up in the U.S.-China dispute, one analyst told CNBC.

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The company reported a 34% on-year increase in net profit of about 22.9 billion New Taiwan dollars ($778.54 million), driven by its server and computing businesses, according to Reuters. It exceeded analysts’ prediction of 17.95 billion New Taiwan dollars, the report said.

Foxconn said revenue from key consumer products, mainly smartphones, declined more than 15% from a year ago, as demand for global electronics was hurt by the coronavirus pandemic, the news wire said.

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Foxconn manufactures and assembles about 30% of its products outside China. Chairman Liu Young-way told an investor conference that ratio could increase in the future, Reuters reported.

“I think they are doing the right thing because previously, Hon Hai or Foxconn’s business model was always to serve customers locally,” Yang said, pointing to the company’s local operations in Texas, that used to previously serve computer-maker Compaq, and had a presence in Indiana and California. Foxconn’s first U.S. manufacturing facility was in Wisconsin and has attracted some controversies.

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Being closer to customers is not the only consideration.

Yang explained that while China has relatively lower labor costs, the ongoing trade dispute between Beijing and Washington factors into Foxconn’s efforts to diversify its supply chain. iPhones assembled in China and shipped to the United States would be slapped with tariffs.