Foxconn plans semiconductor operations in China’s Greater Bay Area

Foxconn Technology Group, the world’s largest electronics contract manufacturer, plans to establish semiconductor-related operations in Zhuhai under a pact it signed on Thursday with the southern Chinese coastal city’s government.

The Taipei-based company, known formally as Hon Hai Precision Industry, will develop semiconductor design services, and semiconductor equipment and chip design in the city, according to the Zhuhai government’s website. This strategic cooperation was first reported by The Wall Street Journal on Friday.

Terry Gou Tai-ming, the billionaire chairman and chief executive of Foxconn, said in a statement on the Zhuhai website that the development of the Greater Bay Area – a Chinese government initiative to integrate the economies of Hong Kong, Macau and nine cities in Guangdong province – “has brought a rare opportunity for Zhuhai”, which aims to develop a semiconductor services industry.

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A new Foxconn base that will house those new semiconductor-related enterprises is expected to be built in the city, according to a person familiar with the matter.

The agreement between Foxconn and Zhuhai also includes the development of projects related to the so-called industrial internet, 5G, 8K ultra high-definition technology and artificial intelligence.

Foxconn, which is the largest private employer in China, said it will speed up the industrial layout, expand the depth and breadth of cooperation, and fully promote the projects with Zhuhai.

A spokesman for Foxconn declined to provide further comments beyond what was posted about the agreement on the Zhuhai website.

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The strategic cooperation between Foxconn, the main supplier for Apple’s iPhone, and the Zhuhai government has come several weeks after the company broke ground on its US$10 billion liquid crystal display plant in the US state of Wisconsin.

That pact represents another effort to support China’s goal in developing a strong domestic semiconductor supply chain and become more competitive with chip industry leader the US.

China makes more than 90 per cent of the world’s smartphones, 65 per cent of personal computers and 67 per cent of smart televisions, according to estimates from Bernstein Research. But the country has had to buy much of the chips that go into these devices from abroad. Annual chip imports by China have risen to more than US$200 billion since 2013 and reached US$260 billion last year.

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China’s State Council published the “National Integrated Circuit Industry Development Guidelines” in June 2014, which marked the country’s official commitment to accelerate the development of the domestic semiconductor industry.

It set a near-term goal of growing annual domestic semiconductor revenue from 2015 to 2020, and become a global leader in all segments of the semiconductor supply chain by 2030.