Foxconn sees Zhuhai as stepping stone to creating own brand

September 03, 2018 11:11
The Hi-Tech Industrial Development Zone is but one evidence of Zhuhai's strong foundation in the technology sector. Photo:

"We are an incredibly large, traditional technology manufacturing business. Now we need to use the power of AI. Foxconn will push smart manufacturing with all our strength.”

That was Terry Gou, founder and chairman of Foxconn, the world’s largest contract manufacturer of electronics, speaking at a meeting in June to mark his firm’s 30th anniversary of doing business in China.

Now it has signed an agreement with the Zhuhai city government as an important step to realize that ambition. The agreement, signed on Aug. 16, calls for the two sides to cooperate in integrated circuitry, industrial internet and high-performance chips for artificial intelligence and 5G networks.

Media reports said the two would build a semiconductor plant in the city, but Foxconn said it did not have such plans “at this time”.

“We are developing plans within the partnership, including other stakeholders in the city,” the company said. “We will be prepared to announce these plans when they have been finalized in the coming months.”

Gou wants to transform his company. It makes products for others, like Apple Inc.’s iPhones, Dell desktop computers and Nintendo game consoles. It is the largest exporter in Greater China. One of China's largest single employers, it has around one million workers in factories across the country. It also has operations in more than 10 countries including Vietnam, Brazil and Mexico.

Gou wants to build its own brand. In 2016, Foxconn bought Sharp Corp. of Japan, including a plant in Fukuyama that designs and produces analog integrated circuits. In 2017, it made an unsuccessful bid to acquire the memory-chip unit of Toshiba Corp.

In 2017, its Foxconn Industrial Internet (FII) subsidiary generated US$56 billion in revenue; it provides industrial robots and cloud computing services to businesses. In June this year, it raised 27 billion yuan (US$3.95 billion) in a listing on the Shanghai stock exchange, the biggest initial public offering in China since 2015.

A major reason for this success is President Xi Jinping’s “Made in China 2025” policy, which will give tens of billions of dollars to smart manufacturing sectors. “We will aggressively devote ourselves to this policy,” said FII chairman Tim Chen.

The manufacturing of integrated circuits in the mainland is an important part of this policy. Currently, China lags behind many countries in this product. In 2017, it imported 377 billion units of integrated circuits, up 10.1 percent from 2016, paying US$260.14 billion, an increase of 14.6 percent. More than half of the sales revenue of US manufacturers like Qualcomm, Broadcom, Micron, Marvell and Skyworks came from the Chinese market.

Zhuhai sees a golden opportunity here. Its agreement with Foxconn “will help it meet growing demand for integrated circuits that would be used for industrial internet purposes as well as for artificial intelligence and next-generation wireless and broadcasting technologies”, the city government said.

For Foxconn, Zhuhai has several attractions. One is its proximity to Hong Kong and the outside world; the company will need expertise from outside the mainland to realize its ambition of becoming a semiconductor maker. The bridge to Hong Kong, due to open before the end of this year, will improve the access even further.

Second, Zhuhai offers an attractive living environment, one of the most pleasant of any city in China and a place where engineers and high-tech specialists would like to live. It has a population of only 1.6 million and nearly 700 kilometers of coastline, with many parks and green areas.

Third is its foundation in the IT sector. According to the city’s statistical bureau, its industrial output in the first seven months of 2018 was 40.193 billion yuan, up 12.7 percent from the same period last year. Fastest-growing sectors were biotechnology, up 15.4 percent, petrochemicals with 13.8 percent growth, and electronics and IT, up 11.6 percent. Output of high-tech companies rose 15.9 percent. Actual foreign investment in the period was US$1.7 billion, up 11.9 percent.

It has a Hi-Tech Industrial Development Zone, established in 1992, with an area of 139 square kilometers. It has four clusters – software and IC design; internet and mobile internet; smart grid; and bio-pharmaceuticals and medical devices. Its clients include ABB of Switzerland, Meizu Technology, Kingsoft Software, Duowan Technology and Jafron Biomedical.

It is home to the campuses of seven universities, including Sun Yat-sen University, Jinan University, Beijing Institute of Technology, Beijing Normal University and United International College.

The Zhuhai government sees a Foxconn IC fabrication plant as the next milestone of its ambition to become an IT center.

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A Hong Kong-based writer, teacher and speaker.