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Is Foxconn Fleeing China?

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Foxconn Technology Group sent Apple Inc. stock reeling on Wednesday. Shares plunged 2.4% on reports that the world?s largest contract manufacturer of electronics?and Apple?s largest assembler?had imposed at its Chinese plants a hiring freeze lasting until at least the end of next month. The Financial Times attributed the unusual move to slowing production of the iPhone 5.

Foxconn, the trading name of Hon Hai Precision Industry, denied the FT report, stating that hiring was put on hold because an unusually high proportion of workers returned to their jobs after the long Lunar New Year break. In Shenzhen, for instance, more than 97% of the 400,000 employees reported back to duty. That, in the words of spokesman Louis Woo, was an ?unprecedentedly high? rate. In a statement, Foxconn said the freeze ?is not related to any single customer and any speculation to the contrary is false and inaccurate.?

Reports in the Chinese-language media indicate the Financial Times got it mostly right, but the big story is not the percentage of returned workers or whether Apple?s phone sales are suffering. The big story is what Terry Gou, Foxconn?s founder and chief executive, said about his upcoming investment plans.

Last Monday, Gou announced that Foxconn?s next major expansion push would be focused on Taiwan, where he wanted to put plants in New Taipei City, Taichung, and Kaohsiung. This comes at a time when the company is putting off the expansion of one of its China facilities, in Zhengzhou.

Gou founded Foxconn in Taiwan in the 1970s, and moved manufacturing away from the island republic to Shenzhen at the end of the 1980s. Now, he is beginning to reverse the process. Moreover, Gou is committing even more funds outside China. For instance, Foxconn will soon open facilities that will employ another 10,000 workers in Brazil. At the same time, he is negotiating with authorities to commit as much as $10 billion to factories in Indonesia.

And then there is the good ole U.S.A., where Foxconn already makes server parts in California and Texas. Said Louis Woo, the spokesman, ?We are looking at doing more manufacturing in the U.S. because, in general, customers want more to be done there.?

One of those customers would, of course, be Apple. CEO Tim Cook, in an interview last December, said his company will spend more than $100 million this year to build Mac computers in America. ?This doesn?t mean that Apple will do it ourselves, but we?ll be working with people and we?ll be investing our money,? he said.

Foxconn, China?s largest private-sector employer, looks as if it should be firmly tied to the People?s Republic. About 1.5 million of its 1.6 million workers are there, and its operations in Mexico and Europe seem marginal to its business. Yet now it?s evident that, despite everything, the company?s growth will be outside China.


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