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Foxconn moving operations out of China

Foxconn, one of the most well known Chinese manufacturing companies as a result of its status as main supplier for Apple, is moving significant parts of its operations outside of China.

The company, which according to TechSpot reported almost $800 million net profit for the quarter ending in June, has already moved an additional 5 percent of its operations to countries other than China, bring it up to 30 percent, compared with 25 percent last year.

China is still overwhelmingly the main base for Foxconn’s manufacturing operations, representing some 70 percent of its production capacity, but the company is scouting many locations abroad.

Foxconn, whose parent is called Hon Hai Precision, is actually a Taiwan-headquartered company, but it has become synonymous with Chinese manufacturing operations in the country and the high profile that comes with being Apple’s main contract manufacturing partner.

Among the locations around the world that Foxconn is looking at to set up facilities are India, Vietnam, Mexico, Brazil and the United States.

The reason for the greater urgency in its effort to geographically diversify away from China is the current mood in Washington, with US President Donald Trump attempting to restrict some Chinese companies’ trading freedoms.

Trump has already effectively banned Chinese state-owed telecommunications giant Huawei from operating in the US, causing much of Europe to follow suit.

He has also recently identified tech companies like WeChat and TikTok for allegedly posing a threat to national security because of the amount of data they hold on US citizens.

However, the current de facto trade war between US and China would probably explain Trump’s manoeuvres more so than considerations about national security.

Whatever Trump’s reasons, companies like Foxconn are faced with the prospect of staying in China and having to deal with increasingly stringent controls on their transactions with American companies, or leaving for other countries which have better trading relations with the US.

However, given that Trump appears to be involved in trade tariff spats from all of America’s main trading partners, it’s difficult to know where companies like Foxconn can go to avoid them.

One thing seems clear at least to Young Liu, chairman of Hon Hai Precision, seems to be that China’s “days as the world’s factory are done”, according to comments reported on Bloomberg.

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