Foxconn’s Billionaire Founder Urges Apple to Move Plants From China

By Debby Wu

The billionaire founder of Apple Inc.’s largest supplier asked the U.S. company to move part of its sprawling production chain from China to neighboring Taiwan.
“I am urging Apple to move to Taiwan,” said Terry Gou, the largest shareholder in Hon Hai Precision Industry Co., answering a question about whether Apple will shift production away from China. 

“I think it is very possible,” he said without elaborating.
The Trump administration’s threat to levy tariffs on some $300 billion of Chinese-made goods -- including phones and laptops -- has inflamed speculation that Apple will divert some capacity away from the world’s second largest economy. 

And Hon Hai is the largest of hundreds of Apple-suppliers with factories on the mainland, making most of the world’s iPhones from the central Chinese city of Zhengzhou.
A significant shift of manufacturing from China to Taiwan -- which Beijing views as part of its territory -- may also exacerbate tensions between the two governments. 

Hon Hai, the main listed arm of the Foxconn Technology Group, is today the largest private employer in China, paying as many as a million mostly migrant laborers to put together everything from iPhones to HP laptops.
Gou, who stepped down as Hon Hai chairman Friday to focus on winning a party nomination to compete in the 2020 Taiwanese presidential elections, had run a company that depends on Apple for half its revenue. 

It’s unclear how much capacity Gou may have been referring to, nor how feasible a large-scale move -- for Hon Hai or any other Apple supplier -- may be.
The Taiwanese firms that assemble most of the world’s electronics are now expanding or exploring plants in Southeast Asia and elsewhere to escape punitive tariffs on U.S.-bound goods. 

But the vast majority of their capabilities remain rooted in China. 

The Nikkei reported this week that Apple asked its largest suppliers to consider the costs of shifting 15% to 30% of its output from China to Southeast Asia, but three major partners to the U.S. company later pushed back against that idea. 

Hon Hai itself has said Apple hasn’t requested such a move.

Han Fifth Column

Foxconn not favored bidder for Toshiba's chip unit due to China link
By Makiko Yamazaki and Kentaro Hamada | TOKYO

Logos of Foxconn and Ennoconn are seen during the annual Computex computer exhibition in Taipei, Taiwan June 1, 2016.

Taiwan's Foxconn, the world's largest contract electronics maker, is not a favored bidder for Toshiba Corp's memory chip business due to its close ties with China, sources with direct knowledge of the deal said.
The Japanese government is worried that selling to bidders close to China may lead to the transference of key technology.
Toshiba is aware of the government's wishes and "will take into account how close bidders are to China in the selection," one of the sources said, adding that Foxconn has production lines in China.
Toshiba, the second-biggest NAND chip producer after South Korea's Samsung Electronics Co Ltd, is considering selling the majority -- or all -- of its marquee flash-memory chip business, as it seeks to make up for a $6.3 billion writedown from its U.S. nuclear unit Westinghouse.
Toshiba is valuing its chip business at least 1.5 trillion yen ($13.1 billion), people familiar with the matter have said. 

Initial bids are due by the end of the month.
Foxconn, formally known as Hon Hai Precision Industry Co Ltd, said last week it was "definitely bidding" for Toshiba's chip business and that it was "very confident" it could buy into it.
Earlier on Thursday the Nikkei business daily reported that Foxconn has approached South Korean chip maker SK Hynix Inc to explore a joint bid.
Foxconn on Thursday declined to comment on Toshiba-related matters. 

SK Hynix also declined to comment.
An industry source familiar with the matter said TSMC, another Taiwanese firm and the world's largest contract chipmaker, is also deeply interested in Toshiba's chip unit.
Elizabeth Sun, a spokeswoman for TSMC, said the company was looking at Toshiba's chip business but had yet to come to a decision.
Sources have said other potential bidders include data storage firm Western Digital Corp which operates a Japanese chip plant with Toshiba, and rival Micron Technology Inc, as well as financial investors such as Bain Capital.
Toshiba has sent invitation letters to around 10 potential bidders, one of the sources said.

China Challenges Vietnam With A Revival Of Its World Factory Status

By Ralph Jennings 

China used to be the world’s factory. 

It overtook the United States in 2011 as the biggest producer of manufactured goods. 

Factories were an “engine” that raised Chinese living standards by doubling per capita GDP in the 10 years ending in 2013, according to a McKinsey & Co. report. 

That shift took the United Kingdom 150 years, McKinsey notes. 

But around 2011 China began to lean more on domestic consumption and domestic direct investment in clean, service-linked sectors, all part of an economically and environmentally sustainable rethink to growing what’s now an $11 billion-plus economy.
Now China is trying to revive its status as the best place to to invest. 

That move poses a challenge to Vietnam, China’s main Asian rival for export manufacturing.

In this photo taken on February 6, 2017, employees work on the Honda Civic production line at the automaker's Dongfeng Honda factory in Wuhan, China's Hubei Province. 

Foreign direct investment in China will increase 15% this year, up from 4.1% last year, government think tank China Center for International Economic Exchanges said as reported by the official, English-language China Daily website on Wednesday. 

Policies that open new sectors to foreign capital and fast-track applications from overseas will help raise that total, the think tank says. 

China Daily also cites advances in “new materials” and “new technologies” as drivers of more investment, though it doesn't give specifics. 

This forecast comes from just one think tank, but its state backing and release in a news outlet aimed at foreigners tells you it’s supposed to be policy.
China needs the boost to offset outflows of capital, much of it removed by Chinese firms that find the home market too competitive or restrictive. 

Outflows hurt currency rates. 

The country's outflows reached about $1 trillion in 2015 and estimates for 2016 aren’t far from that. 

“FDI inflows net of FDI outflows have been negative for the past two years,” says Marie Diron, associate managing director with Moody’s sovereign ratings in Singapore. 

“This net outflow is a drag on foreign exchange reserves. Although scrutiny on capital including direct investment outflows has increased, we do not expect this situation to change.”
Foreign investment in China reached $118 billion last year, China Daily says, less than 2% of the Chinese GDP. 

By that measure, foreign direct investment in Vietnam last year led China, India and Indonesia at 6% of GDP, reflecting the country’s aggressive pursuit of factories run by obscure furniture makers all the way to Foxconn Technology Group and Samsung Electronics. 

Vietnam’s boom in factory exports has fostered support industries, created jobs and raised living standards on the back of economic growth at near 6% per year.
There was never really a direct contest. 

China had drawn foreign investors for decades for its range of talent, relatively cheap land (until recently) and ginormous, increasingly well-off consumer market. 

Vietnam was picking up mostly low-end stuff such as garments and car parts while China got value-added investors such as the PC makers. 

Vietnam has swung toward electronics over the past five years.
But more foreign companies are wondering how welcome they are with China’s official shift to promoting domestic investment, says Scott Kennedy, director of the Project on Chinese Business and Political Economy at American think tank Center for Strategic and International Studies. “Surveys by the American Chamber of Commerce, the EU China Chamber and others all show that MNCs feel less welcome than in the past, and a portion of them have or are planning to move some of their investments out of China as a result,” he says.
Vietnam, which began gearing up as an export center in the 1980s, had come along as a place you could move that investment.
China’s re-launch as a world factory could also make Vietnam more viable as a place for expanding investments, suggests Oscar Mussons, international business advisory associate with the Dezan Shira & Associates consultancy in Ho Chi Minh City. 

“The type of manufacturing industries that draw foreign investors to Vietnam service a lower position on the production value chain,” he says. 

“Taking this into consideration, Vietnam still has loads of room to grow.”

Apple aids and abets Big Brother in China

Lack of transparency in pulling New York Times app adds to Orwellian nature of move 
By Tom Mitchell in Beijing

Most people old enough to have watched the 1984 Super Bowl will not remember the two American football teams that played in it.
They will probably remember “The Commercial”.
In the annals of the NFL playoffs, it is almost as famous as “The Catch” — an improbable end zone grab by the San Francisco 49ers’ Dwight Clark in the 1982 NFC Championship game.
During a break in the third quarter of Super Bowl XVIII, as the Los Angeles Raiders were running up the score on the Washington Redskins, CBS broadcast an Apple advertisement for its new Macintosh computer.
Directed by Ridley Scott, the 60-second spot featured an athlete hurling a sledgehammer into a giant screen on which Big Brother was hypnotising the masses.
The screen explodes, symbolising Apple’s assault on what it regarded as the bland conformity of the emerging personal computer industry. 
Titled “1984” in honour of George Orwell’s novel of the same name, it is today regarded as one of the best television commercials of all time.
It is also sadly ironic in light of recent events in China, where Apple has decided to aid and abet Big Brother. 
Last week, Apple confirmed it had pulled the New York Times app from its online store in China, where the newspaper’s website has been blocked by censors since 2012.
The app was the only way China-based readers could access New York Times content, including articles translated into Mandarin, without having to use special software that is expensive for the average Chinese internet user and often unreliable.
At first glance, Apple had no choice but to comply with the Chinese government’s directive.
China’s smartphone market, the world’s largest, accounted for 20 per cent of its sales — or $8.8bn — in the third quarter of last year.
The California company’s supply chain is also deeply rooted in China.
When running at full tilt, an iPhone manufacturing facility operated by Foxconn in Zhengzhou, Henan province, can produce 1m handsets every two days.
The Chinese government’s leverage over Apple is enormous.
But so is Apple’s leverage over the Chinese government, should it be brave — and wise — enough to use it. 
At a time when Beijing is simultaneously attempting to spur slowing economic growth and halt capital outflows, it badly needs foreign investment and the jobs it creates. 
The iPhone manufacturing facility in Zhengzhou is a high-tech jewel in a relatively poor, inland province, otherwise blighted by twilight heavy industries and chronic pollution.
Foxconn also recently announced it would spend $8.8bn on a flat-panel display factory in the southern city of Guangzhou.
It may well be that Apple quietly fought the good fight before yielding to the authorities’ demand to pull an app that was allegedly “in violation of local regulations”.
But in confirming the decision, Apple could have at least specified what regulations the New York Times app had supposedly violated.
It did not and the lack of transparency surrounding the affair has only added to the Orwellian nature of Apple’s surrender. 
It is a disappointing outcome for a company whose remarkable run, from 1980s iconoclastic outsider to the world’s most valuable company 30 years later, began with such a bold statement.

Apple is the world leader in globalizing Chinese and Foxconn censorship

Apple blocks New York Times in China after paper probes Chinese subsidies given to iPhone maker’s partner Foxconn
By MATTHEW SHEFFIELD

Apple has officially blocked the New York Times from the Chinese edition of its mobile application market.

This move followed a Chinese government ruling that appears to have been sparked by the newspaper’s reporting on massive subsidies provided to Apple’s top manufacturing partner by the People’s Republic.
The ban went into effect on Dec. 23, when Apple formally removed the Times’ English- and Chinese-language programs from its app store for users in mainland China. 

It was not announced by the newspaper until this week, presumably because the Times sought to reverse the decision.
In a statement released to the Times, Apple spokesman Fred Sainz said that the paper had been banned from the app store because it had somehow run afoul of unspecified Chinese laws.
“For some time now the New York Times app has not been permitted to display content to most users in China and we have been informed that the app is in violation of local regulations,” Sainz said in the statement.
“As a result, the app must be taken down off the China App Store. When this situation changes, the App Store will once again offer the New York Times app for download in China.”
The newspaper’s website has been blocked by China’s infamous “Great Firewall” censorship regime since 2012, when it published several reports about the vast wealth of the family of Wen Jiabao, who was at the time the ostensibly Communist nation’s country’s prime minister.
Tom Grundy, editor-in-chief of the Hong Kong Free Press, condemned the move on Twitter, describing it as “Apple eagerly assisting Beijing’s blatant censorship.”
But Apple, the world’s most valuable company by market capitalization, is far from the only major technology firm willing to comply with Beijing’s demands in order to do business in China.
According to former Al Jazeera journalist Melissa Chan, “every single US tech company in China makes compromises in order to enter the market.”
She gave several examples in an essay for the Guardian, including social network LinkedIn, note-taking service Evernote and Microsoft. 
Google is one of the few American tech firms unwilling to comply, opting instead not to do business in China. 
It completely exited the country in 2010.
“But if anybody had hoped Google’s defection would launch an exodus, it never happened,” Chan wrote.
“Since then, Chinese censorship and attempts to control foreign companies have only become more odious, with no indication it will let up.”
According to Wikipedia, about 3,000 major websites are currently banned within China.
The Times apps were blocked by Beijing due to a story that reporter David Barboza was working on about the massive subsidies and other inducements that the Chinese government provides to Foxconn, a Taiwanese firm which is Apple’s manufacturing partner and the largest private employer in China.
According to the Times, Barboza contacted Apple on Dec. 23 for comment about his report. 
Within hours, the newspaper’s management was informed by the iPhone maker that its apps had been blocked for users with billing addresses within mainland China.