Question 1(a)-Foxconn wants to set up plants in the United States, reversing the offshoring trend

of the last 20 years. Does this shift make sense ?

Answer – Case talks about many issue company is facing in china. Some of the reasons are as follow
due to which foxconn is planning to set up plants in United States

 Changing economic condition:- In recent year foxconn is facing changing economic

condition as manufacturing cost in china , labour issue, safety issue, bad working condition
etc. which has impacted contract partners.
 Labour cost:- In recent years labour cost has increase drastically which has made production
costly.
 Shrinking work force:- china work force is decreasing since 2015. It has reduced to 778
million people and it is expected that due to one child policy it will reduce further.
 Locating manufacturing near to demand:- locating manufacturing facilities near to
customer make it easy to identify local need and make it easy to fulfil it. USA contribute 30%
of total revenue and china only 9%. So it makes sense to locate product near to USA.
 Trade war:- vast majority of the revenue comes from USA and USA has impose tariff on
Chinese product which has made in china product costly. Recently UAS has levied 25% fee
on 250 billion dollar of goods. As relation of USA and china getting bitter chances are more
tariffs will be imposed.
 Anti-pollution drive:- over a period of last 5 years china has come up with strong anti-
pollution policy due to which 80000 factories has been shut down and more taxes is going to
imposed. Many European countries and USA discussing about anti-dumping duties on china
which will impact production cost costly.
 Apple:- apple contribute 50% in foxconn revenue and recent manufacturing activity issue
can dampen the apple brand which can be resulted in losing a potential customer and they
want to have geographical diversity due to trade war.

Question 1(b)- what will it mean for Foxconn, its competitors and the entire electronics industry?

Answer:- foxconn do not want to flag bearer of any change or any reform or making an statement or
local production. They just want to support growing demand of OEM customers from production
facilities in USA and get close to their customer. Over last few years foxconn has faced much labour
right issue which has got extensive coverage in foreign media. In response to complain company has
increase the salary at many Chinese factories which has resulted in lower operating margin. Now
companies are facing changing need. This result in dis balance the total cost of ownership and
additional cost and shipping limitation has made it worse.

Furthermore china attitude towards its neighbour over maritime territory has made western
concern. Adding this with nationalist movement during trump tenure over off shoring of
manufacturing facilities and high unemployment has turn local a viable option for western
companies. That’s why foxconn wanting to have production outside the china to retain its current
contract and get new one.

Shifting production facilities from china to western countries will give indication to that offshoring
era to china have come to a saturation period and now further decline can be seen. Company like
foxconn start manufacturing in USA means electronic manufacturing industry will face supply chain
disruption in coming time because they need to reassemble their plant in other geographical region.
It will now stop other industry to offshore their product to china. Now companies will look for new
market which has low labour cost.