Foxconn’s latest move, coming just one day after the announcement the company was scaling back its plans for a $10 billion factory in Wisconsin, much to the embarrassment of President Trump and former Wisconsin Governor Scott Walker, leaves many people wondering just what is going on with the company.
However, according to the Nikkei Asian Review, which cited internal documents, it seems that U.S.-China trade tensions on issues such as tariffs, industrial subsidies, intellectual property, and cybersecurity are playing a big roll in determining what the company plans to do going forward.
Foxconn’s decision to delay work on the two factories throws into doubt the promise of new investment and employment in both countries. China, whose economy has been hit by Washington’s trade tariffs, has slowed to a 28-year low – while Trump continues his battle to seek wins on his campaign promises.
“Foxconn decided to slow the investment pace and scale back a bit at the moment because of weakening macroeconomic conditions and the uncertainties brought by the trade war,” a person with knowledge of Foxconn’s decision told Nikkei.
“If Foxconn expands as planned regardless of the rapidly changing market dynamics, it could eventually hurt the company’s business. It’s much safer to wait and carefully reconsider the next step,” the person added.
The political climate and supply chains
Like any number of big companies have been doing lately – Foxconn has also looked at the bottom line – resorting to cost-cutting measures to protect its investments. This included shedding 100,000 workers by the end of 2018. Then, Foxconn’s best customer, Apple posted a horrible revenue downgrade in January, citing slowing Chinese sales.
So Foxconn’s problems are much more than just stopping the construction of a factory that would employ 13,000 blue-collar workers in the U.S. or a factory in China that is going to have to cut production for the next six months.
But Foxconn said in a statement to the Nikkei Asian Review that the Guangzhou project was on schedule. “Next month we will commemorate the installation of the first Exposure System in Guangzhou,” the company said. “Further updates will be shared in due course.”
It’s questionable just how much is actually on schedule at the Chinese factory. Under a revised timetable, only 20 to 25 percent of the planned monthly capacity will go into operation in the third quarter of this year. The remaining planned capacity has been pushed back six months to 2020, mainly because of market uncertainty.
