Foxconn writes China’s obituary as the world’s factory

During its quarterly earnings announcement, giant Taiwanese electronics manufacturer Foxconn revealed it’s splitting its supply chain to have a separate one just for China.

The reason for the move is the diplomatic and trade war between the US and China, in which the use of any US intellectual property by certain Chinese companies has been prohibited. This creates a major headache for contract manufacturers like Foxconn, who have to fine a way of doing business with both counties without falling foul of the growing list of tariffs, barriers and sanctions they’re throwing at each other.

The only answer, it seems, is to have a branch of Foxconn that only uses Chinese labour, materials and intellectual property for the Chinese market and one that doesn’t use anything Chinese for the US and most of the rest of the world. Much of the world’s manufacturing has been done in China for decades, thanks in part to the low cost of labour there, but Foxconn revealed that 30% of its manufacturing capacity is now based outside of China, up from 25% a year ago.

“No matter if it’s India, Southeast Asia or the Americas, there will be a manufacturing ecosystem in each,” said Foxconn Chairman Young Liu, as reported by Bloomberg, adding that “China’s days as the world’s factory are done.” That’s pretty robust talk from a company that does so much business with China, but is consistent with the kind of stuff fellow Taiwanese contract manufacturer TSMC has been saying.

The Trump government’s policy has apparently been to force stakeholders in the global tech ecosystem to pick a team between the US and China. Right now that strategy has been working in the US’s favour, but China could just be biding (no pun intented) its time until after the US election this year, which could result in a much more compliant administration replacing the current one.