Hon Hai pivots to America after China problems

Hon Hai Precision, the world's largest contract electronics manufacturer, will expand advanced manufacturing in the United States despite high costs after more than three years of labour problems on the mainland followed by pressure from clients and incentives from local governments in the US.

The Taiwanese firm, which trades as Foxconn, has announced plans for two projects in the US state of Pennsylvania totalling US$40 million. Three other states have offered it incentives for what the company describes as "advanced" manufacturing.

Hon Hai revealed its plans for the US, a split from the industry trend of siting factories in inexpensive Asian countries, following a trip in November by its billionaire founder Terry Gou.

The unusual move lets Hon Hai, an assembler of the iPad, lighten up on mainland production, take advantage of unique incentives in the US and meet US client demand for more made-in-America products, analysts say. Major US clients include Apple, Cisco and Dell.

"I think (Gou) is going where his clients and its other partners are in order to keep up relations and secure long-term business relationships," said Jamie Wang, a principal analyst with market research firm Gartner in Taipei.

The normally secretive company said in a November statement it was studying sites in the US for "high-intensity, hi-tech, high-value-added" manufacturing. More detailed plans should emerge this year, Hon Hai spokesman Hsing Chih-ping said.