A key supplier to Apple Inc. and dozens of other tech giants that plan to split their supply chains between the Chinese and American markets, claiming that the time to become China̵7;s factory to the world is over because of the trade war.
Hon Hai Young Liu Precision Industry Company President Hon Hai Young Liu said it is slowly adding more capacity outside of China, the main base that makes devices from iPhones to Dell desktops and Nintendo Switches. The external share is currently 30%, up from 25% last June.
That ratio will increase as the company – also known as Foxconn – moves more manufacturing operations to Southeast Asia and other regions to avoid escalating tariffs on Chinese-made goods to markets. US, Liu told reporters after his company reported financial results.
“No matter if it is India, Southeast Asia or the Americas, there will be a manufacturing ecosystem in each place,” Liu said, adding that while China will still play an important role in Foxconn’s manufacturing empire, “the world’s factory days done.”
Growing trade tensions between Washington and Beijing have prompted device makers to diversify their manufacturing facilities out of China, and last year Liu said that Apple’s most-rated product, the iPhone , can be produced outside of China if needed. The two countries are still in trade negotiations, but Liu’s comments confirm growing expectations that the China-centric electronics supply chain will fragment over the long term.
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The Taiwanese company reported better-than-expected net income of NT $ 22.9 billion ($ 778 million) in the quarter ended June, driven by increased demand for iPads and MacBooks. Sales were NT $ 1.13 trillion, but Hon Hai warned it expected third quarter sales to drop by double digits compared to 2019 due to Apple delaying iPhone launch this year.
Hon Hai is recovering from a record profit drop in the first quarter as production at its factories recover and door orders have fueled demand for home computer equipment. The pandemic is likely to drive iPad and Mac sales, even as the Apple store closures impact iPhone sales, Apple CEO Tim Cook said on July 31 after the joint report. Quarterly collection broke estimates. Apple accounts for half of Hon Hai’s sales.
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Even when Apple outperformed, other Hon Hai customers performed worse. Subsidiary FIH Mobile Ltd. in Hong Kong said in the August 7 earnings statement that despite the new phone Huawei Technologies Co. was popular in China, but they missed expectations elsewhere following US sanctions. Another key customer is Xiaomi Corp. has suffered a backlash in the Indian market amid growing tensions between China and the South Asian nation. FIH lost $ 100 million in the first half of the year.
Foxconn has started its traditional China-focused activities. Hon Hai is among Apple’s assembly partners that plan to expand operations in India, potentially helping the iPhone maker increase its presence in the country of 1.3 billion and move some The US company’s supply chain goes outside of China when the relationship between Washington and Beijing is at odds.
Chinese adversaries are also posing an increasingly large challenge. Local electronics giant Luxshare Precision Industry Co. Fubon Securities analyst Arthur Liao wrote in a July 23 note about the mid-tier and lower Apple handset business.
Mr. Liu said Foxconn will operate in its components business to maintain its technological leadership and it will also benefit from its long-term relationship with Apple.
Orders could be hit more after President Donald Trump issued a ban on US people from doing business with Tencent Holdings Ltd.’s WeChat. TF International Securities analyst Kuo Ming-chi warns that annual iPhone shipments could drop 25% -30% if Apple is forced to remove the app from its app stores worldwide.
(Updated with president’s comment from the first paragraph)
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