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Foxconn Eyes Factories In Us, Indonesia As China's Lustre Fades

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http://uk.reuters.com/article/2014/01/27/uk-foxconn-taiwan-idUKBREA0Q01A20140127

Taiwan's Foxconn Technology Group, the major supplier of Apple Inc's iPhones and iPads, may build high-tech factories in the United States and low-cost plants in Indonesia as the appeal of 'made in China' fades into a burden.

Beset by rising costs and labour unrest in China, Chairman Terry Gou told employees on Sunday that Foxconn is considering diversifying away from its manufacturing heartland. The world's largest contract maker of electronic goods has little choice if it's to protect margins and stay ahead of peers who have adapted the Foxconn playbook into their own success stories.

"The U.S. is a must-go market," said Gou, speaking at the group's annual party on Sunday to mark the end of the Chinese year. Many customers and partners have asked Foxconn to open shop in the U.S., Gou said, with an eye on advanced manufacturing much closer to their home base.

China becoming too expensive and problems increasing with those pesky workers demanding rights?

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No, were are at least 10 years from competing with Chinese wages ***.

I would assume that they have managed to automate the production so less labor is required, if this is the case then there is little point making stuff in china as you don't need people to make stuff.

*** That's if there is not a massive devaluation.

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My brother-in-law commissions garment factories throughout the world. Brand-new factory would be built wherever the local government would offer the lowest tax breaks, run for about five years until the machines wore out, or the tax break ended. then the factory would be sold or abandoned, and the next would be built in the new low-cost zone. Labour costs barely came into the equation, but LAND costs did, as the capital has to be raised at the outset against the land, and in a high-interest environment it could be significant.

Thus he worked (from memory, and in no particular order) in Malaya, West Indies, Mexico, Africa, Burma, Vietnam, China. In Africa, the corruption was so bad he abandoned the project early, in the other countries he had no problems.

He took me to the Malayasian plant one weekend. Very few people working on a weekend, aircon, all the latest CAD equipment, turning out all the well-known high street names, and all the top designer labels.

He told me the semiconductor/electronics business was pretty much the same.

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Not electronics, but here's an interesting list:

Avg Hourly Wage for Garment Workers:

Bangladesh $.24

Cambodia $.45

Pakistan $.52

Vietnam $.53

China $1.26

@ianbremmer

Plenty of other places to go before taking manufacturing back to the West. There's Africa as well.

But the reason for relocating to the West could be because of increased automation if the jobs can be done by a robot.

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I understood that Foxconn were investing in automation in quite a large way, so I guess they don't really care that much about wages if they don't expect to be paying many workers.

“While few companies are shifting manufacturing operations out of the country, they are putting incremental production capacity elsewhere and investing heavily in automation.

“For example, Foxconn usually hires the bulk of its workers for a given 12-month span just after the Chinese New Year. Yet at the beginning of last year, the company announced that it wouldn’t hire any entry-level workers, as automation and better employee retention had reduced its needs.

“Although upswings in the company’s hiring still occur (as with last year’s iPhone 5S and 5C release), the gradual rollout of robots will probably reduce demand for factory workers going forward. In short, many manufacturers—both multinational and Chinese—are producing more with less.”

http://www.icis.com/blogs/asian-chemical-connections/2014/01/china-labour-markets-automation/

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