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On July 24, Hon Hai Precision Industry Co., Ltd., the parent company of Foxconn, a world-renowned electronics manufacturing service giant, officially released a major investment announcement. Foxconn will invest in the construction of a new business headquarters building in Zhengzhou to carry the functions of the new business headquarters. This strategic move not only demonstrates Foxconn's continued commitment and confidence in the Chinese market, but also heralds a new round of expansion and upgrading of the group's business territory.

The first phase of the project is located in Zhengdong New District, with a construction area of ​​about 700 mu and a total investment of about 1 billion yuan. It mainly builds seven centers, including the headquarters management center, R&D center and engineering center, strategic industry development center, strategic industry financial platform, industry research institute and key talent center, marketing center, and supply chain management center, which will provide industrial resources, technical strength and other related support for Foxconn to implement the 3+3 strategy in the mainland; at the same time, around the implementation of the 3+3 strategy, Foxconn will focus on the layout of electric vehicle trial production center, solid-state battery and other projects in Zhengzhou Airport Economic Comprehensive Experimental Zone.

What is particularly noteworthy is that this investment also clearly reveals Foxconn’snew energy vehiclesThe surrounding area of ​​the building and related areas will be used for electric vehicle manufacturing bases and solid-state battery R&D and production projects, which marks Foxconn's official entry into the high-growth track of new energy vehicles. It aims to promote breakthroughs and applications in electric vehicle and solid-state battery technologies through technological innovation and resource integration, and contribute to global green travel and energy transformation.

Whether from the perspective of investment scale or strategic positioning, the new headquarters building built by Foxconn has a significant impact. These signals show that Foxconn is returning to China and also show their determination to make mainland China a large base.

01 Foxconn’s layout in the Indian market

In sharp contrast to the increase in investment in Zhengzhou this time, in 2019, Terry Gou made a bold statement, "I built a factory in the mainland to give food to the mainlanders!" After that, Foxconn has been accelerating its "departure" from China. On the one hand, the scale of many Foxconn factories in mainland China continues to shrink. On the other hand, they continue to increase investment in Southeast Asia and South Asia. The reason why Foxconn did this is, on the one hand, to follow Apple's footsteps and move to the huge potential market of Southeast Asia and South Asia. On the other hand, it is also intended to reduce its dependence on mainland China.

Looking back at the development history of Foxconn, it can be said to be an epic story of growing together with the manufacturing industry in mainland China. Since entering the mainland market in the late 1980s, Foxconn has quickly emerged in the field of electronic manufacturing with its advanced production technology, strict quality control and efficient production management. With the rise of technology giants such as Apple, Foxconn has successfully become a core supplier of companies such as Apple with its professional capabilities and economies of scale in the manufacturing field, providing hundreds of millions of high-quality electronic products to consumers around the world.

To some extent, China and Foxconn have achieved mutual success over the past few decades. China has provided Foxconn with favorable policies, abundant cheap labor, and industrial support, which has helped Foxconn grow and become the world's largest foundry. Foxconn has brought a large number of jobs to China, driving the growth of local economic industries and exports.

At present, many regions in my country, especially Zhengzhou, Henan, have formed a strong employment and economic dependence on Foxconn. Currently, a large part of the Apple mobile phones manufactured by Foxconn are completed in the Zhengzhou Park, and Foxconn has also become the most important export enterprise in Zhengzhou.

Statistics show that since Foxconn entered Henan, its cumulative total import and export volume has accounted for about 60% of Henan Province's total import and export volume, and about 80% of Zhengzhou's total import and export volume. Driven by Foxconn, Xinzheng Free Trade Zone has achieved leapfrog development. By 2023, the total import and export value will reach 407.278 billion yuan. The total import and export value generated by Xinzheng Free Trade Zone alone accounts for 50.23% of Henan Province, and Xinzheng Free Trade Zone has also become the first comprehensive bonded zone in the country.

However, in recent years, the labor cost in mainland China has been rising, and the environmental protection policy has become increasingly strict. Foxconn's operating costs have also been increasing. At the same time, emerging markets such as India have attracted more and more international companies to invest and build factories with their low labor costs. In this context, Terry Gou began to consider moving 300 billion production capacity to emerging markets such as India. Since then, he has been shifting part of the supply chain to India by dispersing the supply chain.

As early as 2015, Foxconn announced that it would set up a production base in India to provide local employment opportunities and technical support. As the Indian market continues to grow, Foxconn's investment in the Indian market is also increasing. This year, Terry Gou announced that he would invest an additional $500 million in the factory in Telangana, India, which will create 25,000 jobs locally.

02 Foxconn’s increased investment in mainland China is due to the return of Apple’s industrial chain

In recent years, there have been voices calling for the gradual transfer of low-end domestic manufacturing to Vietnam and India. Foxconn, the world's largest electronics foundry, has also shifted part of its industrial chain to India and Vietnam. However, as Apple's investment in Indian factories encountered bottlenecks, the situation has reversed.

According to reports, the iPhone 15 OEM business in India only accounts for about 10% of the total, and there are many problems. Since Indian factories need to rely on importing a large number of parts from mainland China, both quality and efficiency are affected; in addition, the yield rate of iPhone OEM in Indian factories is also problematic, with a yield rate of only about 50%.

These two problems caused troubles when exporting products to both Europe and mainland China, affecting market sales. Apple was also forced to slash prices because the iPhone 15 was not assembled smoothly in the Indian factory and was returned.

After learning from the lessons of its Indian factory, Apple no longer dared to bet on its high-end models in Indian factories, and decided to outsource some of its latest high-end iPhone models to mainland China.

In addition to Foxconn, Apple has also assigned large-scale production orders for the high-end iPhone 16 series to BYD, which is also a partner in assembling iPads.

On March 22, BYD President Wang Chuanfu met with Apple CEO Tim Cook at Apple's China headquarters in Shanghai. During the meeting, Cook said: "For Apple's supply chain, I think there is no place more important than China." When Minister of Commerce Wang Wentao met with Cook, Cook also reiterated that Apple will continue to be committed to long-term development in China and continue to increase investment in China's supply chain, R&D and sales.

Foxconn's investment in the new energy vehicle track may also be related to Apple's resumption of its car manufacturing plan. Following Apple's deployment, Foxconn decided to invest heavily in mainland China to consolidate its position in the foundry industry.

03 Reasons for the Indian market falling out of favor

There are two main reasons why Foxconn built a factory in India. First, to respond to the needs of major customers such as Apple, to diversify supply chain risks, and to ensure stable production. Second, Foxconn took a fancy to India's large and cheap labor market and intended to reduce costs. Terry Gou believes that Foxconn can replicate its successful experience in mainland China no matter where it is. However, the reality is cruel, and now the Indian market seems to be gradually "falling out of favor". In summary, the Indian market has the following fatal problems:

First, although India's labor costs are low, the quality and technical level of workers are difficult to match those of the mainland, resulting in unstable product quality and low production efficiency. Although India is also a country with a population of 1.4 billion, the level of education in India is far lower than that in my country, and the problem can be seen from the yield rate of products.

Secondly, India's poor business environment has brought great challenges to Foxconn's production and operation. India's attitude towards foreign-funded enterprises is changing. At first, India attracted foreign-funded enterprises to invest by offering tax incentives and other conditions, but once these enterprises grew stronger, India began to suppress and harvest them through various means. Take Wistron as an example. It came to India to build a factory before Foxconn, but was acquired by India's Tata Group and was forced to announce its withdrawal from the Indian market.

Through the acquisition of Wistron, Tata Group has become the Indian foundry for Apple iPhones and is also negotiating with Pegatron to acquire a majority stake in its Indian factory. Once these acquisitions are completed, Tata Group will further expand its influence in the electronics manufacturing industry and become an important force in the electronics manufacturing industry in India and even the world.

In order to strengthen its strength in the field of smartphone manufacturing, Tata Group has begun to actively poach talents. Tata Group has poached a large number of technical talents from Foxconn India at high prices. These talents have rich experience and skills and are an important pillar of Foxconn in the field of smartphone manufacturing.

Although India is a country with a huge market, its business environment has been criticized. Even the Indian media themselves admit that India's business environment is indeed not very friendly to multinational companies.

In addition, India's infrastructure and supply chain construction are far less perfect than China's. The development of the manufacturing industry requires the support of a sound supply chain system, including raw material procurement, parts supply, logistics and transportation. However, India's supply chain system has major defects, resulting in low production and delivery efficiency of manufacturing companies. In addition, India has a huge gap with China in infrastructure construction such as electricity and transportation.

Finally, India’s policy support is insufficient. Although the Indian government has put forward slogans such as “Make in India”, its actual support is relatively small. Compared with the Chinese government’s investment and policy support in the manufacturing sector, the Indian government’s support is far from enough.

Although India has been trying to emulate China in developing its manufacturing industry, the challenges it faces in terms of infrastructure, labor, government support and supply chain make it difficult for India to achieve the status of Made in China.

04 Apple's main supply chain is still in China, but India should not be underestimated

Although there have been frequent reports of Apple's industrial chain moving abroad in recent years, China still maintains an advantage in terms of the number of specific supply chain companies.

In April this year, Apple announced its annual supply chain list for fiscal year 2023 on its official website. From the distribution of factories in the list, mainland China ranks first with 155 factories, followed by Taiwan with 49 factories, and Japan with 41 factories. In Southeast Asia, Vietnam has 32 factories, Thailand and Singapore with 23 factories each, Malaysia with 18 factories, and the Philippines with 16 factories. In addition, the United States and India have 25 factories and 13 factories respectively.

In addition to being the top of the supply chain, China also has a significant impact on many of Apple's overseas factories. Take the Indian Apple factory as an example. It needs to rely on importing a large number of parts from mainland China, which affects both quality and efficiency. In fact, the number of iPhone 15 foundries in India accounts for only 10%.

As Apple's new 16th generation mobile phone is about to enter its peak production, both Foxconn in Shenzhen and Foxconn in Henan have started an intensive battle to attract talent. It can also be seen that China's importance to Apple remains solid.

Since July, leading Apple supply chain companies such as Luxshare Precision, Foxconn, Lens Technology, and Berne Optical have been aggressively recruiting workers. The recruitment information of Apple supply chain companies has almost "dominated" the advertising boards of the recruitment market, and some manufacturers are even "stealing talent" by continuously increasing wages.

The Chinese supply chain is not comparable to the Indian supply chain, forcing Apple to turn and make a commercially rational choice.

However, there are also reports that we still need to be vigilant about the transfer of the industrial chain to the Indian market. Apple may assemble iPhone Pro models in India for the first time, with Foxconn taking the lead.

India is also gradually increasing its infrastructure construction. After the 2024 Indian general election, Modi announced that he would further expand infrastructure construction. In the budget submitted by the new government on July 23, infrastructure investment was placed in a prominent position.

The head of India's finance department stressed that India has invested 43.5 trillion rupees in the infrastructure industry in the 10 years from 2014 to 2023. Modi said: "The development in the past 10 years is just an appetizer, and the main course will appear in the third term."

In addition, Indian Prime Minister Narendra Modi announced the Future Skills Initiative in 2018. Since then, the Indian Ministry of Electronics and IT and NASSCOM have been working with the IT industry to use the Future Skills platform to train more than 200,000 IT employees. Currently, the platform provides skill training for 10 emerging technologies such as artificial intelligence, cybersecurity, and blockchain, involving 70 new positions and 155 new skills.

Due to the existing demographic dividend, more than 90 million people will join the labor market in India by 2030. In addition to the government, Indian IT giants have also been investing in employee retraining and skill enhancement, with a total investment of more than 10 billion rupees per year.

Some analysts say that Apple and Foxconn are still increasing their investment in India and insisting on de-Sinicization.