China's days as "the world's factory" are numbered, according to Foxconn chairman Young Liu.
Speaking to investors on a conference call, the Apple supplier's boss predicted local markets would grow their own manufacturing ecosystems, pointing to India and the Americas. Foxconn – also known as Hon Hai Precision Industry Co – now performs 30 per cent of its production outside of China, up from 25 per cent in June 2019.
"No matter if it's India, Southeast Asia or the Americas, there will be a manufacturing ecosystem in each," he said.
China's manufacturing base rapidly expanded following its entrance into the World Trade Organisation on 11 December 2001. Standardised trading rules and a cheap labour force attracted foreign firms, which swiftly shifted jobs and production to the Middle Kingdom. It only took a couple of decades for China to emerge as a manufacturing powerhouse with a thriving middle class and breakneck economic growth.
But this trend couldn't continue forever. Rising wages in China made the nation less attractive to outside investors, who could find cheaper sources elsewhere in Southeast Asia, like Vietnam and the Philippines.
Samsung, for example, does the bulk of its smartphone assembly in Vietnam, making the country the second-largest exporter of smartphones in the world.
Other nations, namely India, saw domestic manufacturing soar thanks to the imposition of crushing import tariffs on foreign made equipment. This has led to surprising anomalies, like Chinese smartphone brand Xiaomi operating seven manufacturing facilities in India to cater to that local market. Apple also manufactures in India, with an iPhone 11 production plant based near Chennai.
The growing assertiveness of China's foreign policy has caused some Western governments to try to reverse the flood of manufacturing goods eastward, particularly in industries with national security consequences. This resulted in TSMC planning a $12bn 5nm fab in the US – no doubt thanks to some carrot-dangling from US president Donald Trump's administration.
There's also the Foxconn plant in Wisconsin, although perhaps it's best not to mention that. ®