Foxconn Technology will transform its south China manufacturing hub into an engineering base and move 200,000 jobs to cheaper inland provinces in a further sign that the region’s days as a low-end production centre are numbered.
The world’s largest contract electronics manufacturer employs 1m people in China. About half its workforce is based at two huge factory complexes in Shenzhen, near Hong Kong.
“Shenzhen will probably be our largest site in China for quite some time to come,” Louis Woo, special assistant to group chairman Terry Gou, told the Financial Times. “But the goal is to eventually move all of the actual mass manufacturing to other sites. We will make Shenzhen an engineering campus where we do pilot production only.”
Foxconn, a unit of Taiwan-listed Hon Hai, began its move to less developed regions of China last year, after a series of suicides among its Shenzhen workforce. The company responded to the crisis by raising wages – a trend that was reinforced last year after pay-focused strikes at a number of Honda factories in south China.
Mr Woo said Foxconn’s Shenzhen headcount would eventually drop below 300,000.
The company’s decision to reinvent its Shenzhen factories as “engineering campuses” is emblematic of the broader relocation of low-end manufacturing processes from coastal manufacturing zones with relatively high costs.
Foxconn makes mobile phones, flatscreen televisions, computers and game consoles for customers including Apple, Sony, Nokia and Dell. Like most contract manufacturers, it already carries out hardware research and design on behalf of its multinational clients.
Because of the large amount of parts and complicated production processes required to make consumer electronic products, the establishment of a new Foxconn assembly plant typically attracts dozens of smaller supplier facilities.
The early presence of Foxconn International Holdings, Hon Hai’s Hong Kong-listed handset manufacturing unit, helped transform Shenzhen into a global manufacturing base for the consumer electronics industry.
Foxconn is building huge plants in Henan and Sichuan, two of China’s most populous provinces and home to most of the migrant workers who have moved to work at factories in coastal export centres such as Shenzhen.