In today’s global industrial shift, the shifting and establishment of Foxconn factories attract significant attention because Foxconn is not only a supplier of mobile terminals like computers and cell phones, but also an automated original equipment manufacturer (OEM). Many of Foxconn’s own equipment is produced internally rather than being entirely sourced from external suppliers.
According to relevant data, Foxconn’s annual component purchasing volume accounts for about 10% of China’s total component consumption. This massive order volume and unique equipment demands cause Foxconn’s upstream manufacturers—such as automation and raw material suppliers—to closely monitor its movements regarding industrial shifts and factory relocations.
As a leader in the global electronics manufacturing services (EMS) industry, Foxconn’s strategic adjustments and financial performance not only reflect its own business conditions but also serve as a barometer for changes in the entire electronics manufacturing sector. Therefore, analyzing Foxconn’s financial report can reveal valuable hidden market information.
Relocation of Foxconn and Upstream Suppliers’ Production Lines
First, labor costs in China have risen steadily over the past few decades, prompting manufacturing giants like Foxconn to relocate their production lines to countries with lower labor costs, such as Vietnam, India, and Mexico, to maintain cost competitiveness.
Second, recent trade tensions between China and the U.S. have resulted in higher tariffs on products produced in China and exported to the U.S. By moving its production base to other countries, Foxconn can circumvent these high tariffs.
Additionally, several Southeast Asian countries have offered tax breaks, subsidies, and other policy incentives to attract Foxconn and other large manufacturing firms to establish factories, thereby promoting foreign direct investment.
According to incomplete statistics from MIR DATABANK, Foxconn has established over 200 factories worldwide, with more than 90% in the electronics manufacturing sector. These factories primarily produce a wide range of electronic products, including cell phones, tablets, computers, and liquid crystal displays.
From a regional perspective, Foxconn’s factories are now located globally. As costs rise and the trade war between China and the United States intensifies, Foxconn has gradually shifted its factories to Southeast Asia, particularly to Vietnam and India, over the past two years.
In 2023, Foxconn established 15 factories in Vietnam, with two under construction and two proposed. Among them, a new factory in Vietnam is expected to commence production in 2024, primarily for MacBook manufacturing.
In India, Foxconn has built a total of seven factories, with three under construction and four proposed, all expected to begin operations in 2024.
The electronic manufacturing process includes Surface Mount Technology (SMT), whole machine assembly, machine testing, and packaging, with SMT being a critical assembly technology for placing electronic components on PCB boards. SMT offers advantages such as high mounting density, compact size, and lightweight electronic products, making it an indispensable core of the PCB industry.
With the transfer of Foxconn’s factories, many SMT equipment manufacturers have also relocated to Southeast Asia.
Regarding electronic manufacturing equipment, the mounter is a device used in production lines to accurately place surface mount components on PCB pads. In the SMT process, mounters account for about 60% of the total market. As the 3C electronics industry shifts, SMT mounter manufacturers are increasingly establishing overseas factories, enabling them to directly purchase equipment in those regions.
For ultrasonic cleaning machines, China’s market accounted for approximately 30% of the 3C industry in 2023. As industry shifts occur, automation equipment manufacturers have begun building overseas factories, leading to a gradual decline of more than 5% in China’s ultrasonic cleaning machine sales volume annually.
In the AOI inspection equipment market, PCB applications are the main downstream users of AOI equipment, which accounted for about 90% of the total market size in 2021. Influenced by industrial transfers, overseas factories can purchase equipment directly in their regions. Meanwhile, capacity saturation in the Chinese market has slowed the demand for AOI inspection equipment, resulting in declining sales.
Global Electronics Trends from Foxconn Earnings
Foxconn is the world’s largest electronics manufacturing services company, commanding a global market share of over 40%. According to Foxconn’s annual report, 98% of its revenue comes from 3C electronics manufacturing, providing valuable insights into the global manufacturing industry through its performance.
Foxconn’s financial report indicates a decline in net profit from 2019 to 2020, followed by a slight increase from 2021 to 2022. In the 2022-2023 period, although profits rose, revenue experienced a significant decline. As a cyclical industry, electronics manufacturing has faced downturns over the past five years.
However, in the second half of 2023, the global electronics manufacturing industry began to show signs of recovery. During this time, Foxconn’s net attributable profit has increased for three consecutive quarters, with the highest growth rate reaching nearly 30%. This resurgence in demand for electronics manufacturing is projected to continue into 2024, prompting Foxconn to return to China and restart recruitment to expand its capacity in Zhengzhou, Henan Province.
According to relevant data, global smartphone shipments in the second quarter of 2024 grew 6.5% year-on-year to 285.4 million units, marking the fourth consecutive quarter of growth. Meanwhile, in the first half of 2024, shipments in the Chinese market reached 147 million cell phones, reflecting a significant increase of 13.2% year-on-year.
These figures confirm that the global electronics manufacturing sector is indeed in a rebound phase, which is positively correlated with Foxconn’s earnings data.
From a smartphone perspective, the U.S., European, and Chinese markets have matured, leading to a slowdown in cell phone sales growth. In contrast, markets in Vietnam, India, and other Southeast Asian countries are experiencing rapid growth, with relatively low smartphone penetration rates, positioning them as future drivers of global smartphone sales.
Foxconn’s factory layout in Southeast Asia has been steadily developed, indicating that this region will remain a key area for the transfer of Foxconn’s major factories.
Amid the global consumer electronics market rebound, Foxconn, as a leader in precision foundry, has garnered significant market attention regarding its future development trends. As a primary provider of manufacturing services for major brands, Foxconn’s business dynamics and expansion plans are viewed as critical indicators of the industry’s health.
Looking ahead, Foxconn’s focus on automation, smart manufacturing, and emerging markets is likely to be a key factor in driving the company’s growth. MIR Industrial, an organization dedicated to in-depth industry analysis, will continue to monitor headline companies, including Foxconn, and provide our readers with accurate and detailed insights into industry developments.
Source: Foxconn, cnbc, macg
