Foxconn's complex in Shenzhen in 2011. (Photo/CNS)
Recent speculation that Foxconn may relocate its main production hub in China from Shenzhen to Chengdu has drawn a great deal of attention. While some analysts believe such a relocation may have a positive impact on a transformation of Shenzhen in terms of its position among key cities in the country, other industry players are concerned about the potential economic harm to the region if the world's biggest contract manufacturer of consumer electronics moves away. In any case, the move seems inevitable.
Foxconn claims to have no knowledge about the speculation, according to company executives cited by the Guardian. But it is a fact that the Taiwan-headquartered has already been moving some of its production lines to inland regions as part of its long-term strategy.
According to the Guardian, Foxconn had been considering branching out from Shenzhen, where it has its largest factory in the town of Longhua, since 2005 but it held these plans back until 2010, the year when a spate of worker suicides at the plant brought the company the kind of publicity it didn't want. As one advantage of moving production to cities in interior provinces would be to allow its migrant workforce to work closer to home, the deaths were one factor prompting Foxconn to expedite its plans to relocate production lines (except for high-yield lines such as those for Apple, Dell, HP and Lenovo) to other cities and leave the Longhua base as a pure R&D center.
Establishing production base in accordance with the regional deployment of clients has long been Foxconn's strategy, according to industry watchers, such as the US$1 billion that Foxconn invested at Chengdu in October 2009 following Corning Glass and Sony Ericsson. Its plant at Chongqing is also said to be in line with HP's deployment in the area. an unnamed company executive said the Chongqing relocation is very much driven by cost concern.
Leaked minutes from a meeting in July 2011 — which have not been confirmed by Foxconn — showed that the company planned to merge the two Shenzhen production complexes at Longhua and Guanlan, reducing the local labor force from 400,000 to 100,000.
As a labor-intensive company, the rising manufacturing costs in China's coastal provinces have been a major headache for the company. The Shenzhen Special Economic Zone government, which has expressed its desire for Foxconn to focus more on new products that derive higher economic value and margins, also runs counter to the company's nature as a contract manufacturer.
With the recent construction of a new headquarters in Shanghai, Foxconn expects to focus the majority of its R&D works there. The company also plans to establish an electronics business center at Shanghai Minbei Industrial Park, implying the Shenzhen site will serve purely as a production hub in the future.