Apple’s manufacturer invests millions in the US to meet more demand
Taipei-based Foxconn Technology Group, whose biggest client is Apple, is to invest $US40 million in the United States to boost its high-end production chain. The move, welcomed by the US government, is part of the growing trend to seek a non-China outsourcing location. The world’s biggest contract electronics manufacturer will commit $US30 million to build a high-tech plant for making precision tools, components for telecommunications equipment and other advanced technologies. Foxconn flagship company – Hon Hai Precision, will also fund $US10 million for research and development in robotics at Carnegie Mellon University in Pennsylvania. The main rationale behind the investment, which also creates 500 hundred jobs in the US soil, is to meet customers’ demand for more of their products be domestically made. “This is an example of results-focused outsourcing in which the customer retains control of the relationship. Although Foxconn can also win by investing in US-based manufacturing, the original call was made by its customers.” – said Vivek Sood, CEO of Global Supply Chain Group. Foxconn will not move the production of Apple’s iconic iPhones or iPads to the US, amid the growing trend for American technology companies to relocate manufacturing plants so that their product designers can be near the manufacturers for quality control. “We won’t be migrating Chinese production lines, but creating high-precision, high-tech, high value-added manufacturing in the U.S for future technology trends,” Terry Gou – Founder and chairman of Foxconn said. The company has its fingers in multiple pies, as most service providers, and is responding to the modularisation trend. “We’ll go from original component R&D through to a complete high-end production chain. However this is not, as assumed, manufacturing for a specific brand”, said Gou. “Many technology companies are now seeking modularisation to achieve homogeneity, where products start looking similar, eventually leading to falling prices. Foxconn knows they are playing in an increasingly commoditised market and their decision to raise their bar is understandable in ensuring the leading position.” – said Vivek Sood, author of “Move Beyond the Traditional Supply Chains: The 5-STAR Business Network”. On the other hand, many US companies are not reaping desirable benefits from their outsourcing in China and moving their production back to their homeland. “This insourcing movement is a result of poor supply chain strategy planning. Many companies choose to go with the obvious benefit of low labor costs while ignoring other factors, which may well offset the former” – Sood added.