Foxconn, Pegatron, and Quanta Computer are ready to rapidly ramp up US manufacturing investment in response to any changes in national policy.
In a sign of the times, Apple’s key manufacturing partners are ready to ramp up production in the US should the incoming Trump administration keep its promise to levy painful surcharges on Chinese imports.
But, of course, these new factories won’t necessarily create vast quantities of jobs, as they are likely to be focused on strategically important, high-value goods made in heavily automated plants.
All the same, the news is that Apple’s big Taiwanese partners — Foxconn, Pegatron, and Quanta Computer — are ready to rapidly ramp up US manufacturing investment in response to any changes in national policy, explained Foxconn Chairman Young Liu. His company already has production centers in Texas, Wisconsin, and Ohio, and is ready for additional expansion, he said.
Dealing with uncertainty
This may be shrewd preparation, given that President-Elect Donald J. Trump has threatened to put a 60% levy on Chinese-made products once he re-takes power. “Trump has just been elected. It’s uncertain what policies he will implement…. We’ll be watching to see what changes there will be from the new U.S government,” Liu said, according to Reuters.
Liu was speaking during the company’s stronger-than-anticipated quarterly results call. The company revealed that net income for the quarter was $1.5 billion, with demand for server chips boosting performance. He expects Foxconn to take at least 40% of the global server market in future.
That demand for server chips means the company can see even more value in US production, with Alphabet, Meta and Amazon set to spend billions on server infrastructure to drive AI this year. If you combine that demand with the growing recognition of the need to protect data sovereignty, you can surmise that making servers in this kind of quantity near or in the regions that are demanding them is a sensible business move for the company. (Liu actually uses the term “sovereign server” to articulate this.)
Similarly, as tensions with China could increase under Trump’s management, the Taiwanese firms may feel that manufacturing consumer products in the US is a price they can pay in exchange for some protection around their own national security. (And the strategic need to encourage companies to make chips in the US makes achieving that a matter of national security.)
What about the iPhone
Liu was light with detail on the company’s biggest client, though Apple critics seeking a little mood music might note his warning that the smart consumer products business will show a decline this year. This could either suggest iPhone sales are lower than anticipated or could hint that iPhones are eating the industry’s lunch, with other smartphones Foxconn also makes for other brands not selling terribly well.
Decoding the shadows surrounding the data, it is perhaps telling (and probably related) that Foxconn’s sales hit a record high in October, when the iPhone 16 was introduced.
I’m inclined to imagine the Apple smartphone is doing just fine.
The new tech, US and India?
The need to diversify manufacturing bases is generating international investments. Apple, Foxconn, and other Apple partners are also deeply immersed in building business in India, with Foxconn already putting $10 billion into that attempt.
The company intends to make even bigger investments there, even as a local report claims Apple and its suppliers aim to make just under a third (32%) of all iPhones made globally in India by fiscal 2027.
But even in India, the labor force is a cost, and Foxconn (and Apple) already have plans to reduce the number of workers involved in iPhone assembly, perhaps by as much as 50%.
They hope to achieve this through automation and artificial intelligence, though there is a lot of work to do before robots can match human manufacturing success — still, Apple has said its manufacturing headcount dropped from 1.6 million workers globally to 1.4 million in 2023.
An iPod, a phone, a tool for international politics
Jobs, international tension, money, the march of AI, trade wars and surveillance as a service…., we’re through the smartphone looking glass, people, and no mistake.
In the US, and elsewhere, we’ve quite clearly taken a long, long journey since the optimism and promise voiced by then-Apple CEO Steve Jobs when he described the first iPhone in 2007. He did not say an “iPod, a phone, and a device that challenges economic and national security.”
It is only today, as the march of digital transformation continues, that this is what it turned out to be.
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