Terry Gou, head of iPhone assembler Foxconn, downplays risk of US-China trade war
Terry Gou, chairman of the world’s largest contract electronics manufacturer – which makes most of the world’s iPhones at giant factories in mainland China – has a lot to lose if a trade war breaks out between Washington and Beijing.
On Thursday Gou downplayed such a possibility, simply saying “I do not think a trade war [between the US and China] will start,” without elaborating.
Gou, who has a net worth of US$6 billion according to Bloomberg data, had agreed to speak with a small group of reporters in Tianjin, China, ahead of plans for a Foxconn unit to launch an IPO in Shanghai. However, he arrived late to the meeting and left after 10 minutes, without answering many questions.
A Chinese delegation led by vice-premier Liu arrived in Washington this week for talks with the Trump administration on ways to avoid a costly trade war between the world’s two biggest economies.
The situation looked grim last week after a US delegation visiting Beijing failed to make progress, but conditions have recently improved after President Donald Trump’s surprise decision to ease US penalties imposed on China’s ZTE Corp.
Gou’s assistant Louis Woo later addressed the trade war issue in more detail, saying the company will “try everything we can and use private efforts” to avert such a situation.
“As a global company，we certainly do not like to see any kind of trade war between the two nations. No matter what kind of trade war, no one will win,” he said.
Four American companies – Apple, HP, Hewlett Packard Enterprise and Cisco – contributed a combined 60 per cent of Foxconn’s 2017 revenue, according to Bloomberg analytics. US chip companies like Qualcomm and Broadcom were the largest in the group of Foxconn’s US suppliers, with 24 of them contributing a combined 8 per cent of the contract manufacturer’s costs.
Several of Foxconn’s largest contract assembly plants are already in mainland China, where the company employs as many as one million staff to put together personal computers, laptops, Apple’s iPads, iPhones and consumer electronics of all sizes and specifications.
Last year it also announced two separate multibillion dollar investment deals to build factories and R&D operations in the US states of Wisconsin and Michigan. Construction on the Wisconsin plant, which will produce liquid crystal displays (LCDs), began on April 26 this year, 12 months after the deal was struck with the state government, according to Woo.
Woo also said that the company tries to strike a balance between investment in the US and China. “How to benefit each market or even be mutually beneficial to both markets [is the question we ask ourselves]”, he said. “The demographic benefits of the US are more to do with the talent. You can find excellent talent in terms of innovation, technology, and creativity, so that’s where we will invest a lot in terms of staff.”
The company last year said it would invest 37.5 billion yuan (US$5.74 billion) to expand its facilities in Nanjing city, China, making it the largest smartphone assembly plant in the world, while also pledging to invest US$8.8 billion in a new LCD plant in Guangzhou.
Earlier this year Gou said that Foxconn aims to become a global innovative AI platform rather than just a manufacturing company, with plans to invest at least 100 billion New Taiwan dollars (US$342 million) over five years to recruit top talent and deploy artificial intelligence applications in all the manufacturing sites.
“Chinese people are intelligent. They will give their contribution if they have the opportunity and confidence,” Gou said on Thursday in response to a question about the different AI talent recruitment strategies between China and the US.
Woo added that Foxconn’s AI strategy includes its plan to use smart robots to replace human jobs that are “dangerous, dull and boring”.
“If you look at the younger generation today, most of them want to work in service sector, rather manufacturing sector. So we have difficulties in recruiting young people to do such work. We will need to automate these processes as quickly as possible,” Woo said.
Separately, Foxconn Industrial internet aims to raise 27 billion yuan by floating 1.8 billion shares, or 10 per cent of its capital, on the Shanghai Stock Exchange. It will use the proceeds to fund eight new projects including cloud computing, building a data centre, 5G mobile network technology, “internet of things” projects and expansion into so-called intelligent manufacturing, according to its stock sale prospectus issued earlier this month.
Foxconn passed through a review procedure by the CSRC in early March, just five weeks after it filed the IPO application. The speedy clearance underscores the priority that mainland China is giving to technology companies as it competes with Hong Kong as Asia’s hub for fundraising.
Normally an IPO applicant needs to wait for about two years before it is allowed to raise capital on the Shanghai and Shenzhen stock exchanges.