Unwilling to be “world factory”, Foxconn has a long way to go to OEM

Recently, Foxconn Chairman Liu Yangwei said in an interview after announcing the company’s financial results that China’s days as the “factory of the world” are over because of the trade war. It said Foxconn was gradually expanding its capacity outside China and splitting its supply chain between the Chinese market and the US market. From the perspective of the process of China becoming the world’s factory, this view is reasonable. As China’s labor costs rise and trade wars intensify, China is no longer a world factory. After all, a large part of the reason why China was looked after was the low labor cost, but now it is not the past. What’s more, the United States’ sanctions against China also make the situation more severe. In contrast, Southeast Asia, the Americas and other regions have low labor costs, and there will be no pressure from the United States. On the surface, it seems to be suitable for becoming a new world factory. However, in fact, the quality of workers in these areas is not as good as that in China, and China has accumulated experience through many years of OEM, so it is difficult to reach the maturity level of Chinese factories by taking new regions as substitute factories in a short period of time. It can be seen that China has not yet been able to “shake off” its status as a world factory. Although Liu Yangwei’s remarks have some truth, it can’t be said that there is no “selfishness” involved, because Foxconn is committed to the transformation from OEM to industrial Internet. For this reason, Foxconn has established “Fulian industry”, which is regarded as the forefront of Foxconn’s transformation and upgrading. In the concept of Foxconn industrial Internet, the key words include 5g, Internet of things, big data, cloud computing, etc. Foxconn hopes to serve the transformation and upgrading of enterprises with its rich experience in the manufacturing industry. < / P > < p > the concept of Fulian industry looks quite high-end, and Foxconn’s vision is also very good. But so far, there are still many disputes about Fulian industry. < / P > < p > according to the data of the semi annual report, the most distant business of Fulian industry from OEM is high-tech service business, but the revenue of this business is only 253 million yuan, a year-on-year decrease of 23.03%; although the mobile network equipment business and cloud computing business have achieved growth, they still have a long way to go. The cloud computing gross profit margin of Fulian industry is only 4.48%, and the profit is very meager. In the eyes of the outside world, Fulian industry regards OEM as its main business, which is no different from Foxconn’s main business. In the final analysis, the industry is not mature enough. Although the concept of “industrial Internet” sounds very powerful, the industrial Internet itself is still in its infancy and has a vague prospect. Therefore, the small and medium-sized enterprises that are facing the business related to the industrial Internet are more cautious and wait-and-see attitude. They will not buy the account very happily and the capital will not enter the Bureau easily. Even the chairman of Fulian industry also believes that the transformation from manufacturing to service industry is doomed to go through a long-term process, and it has not yet shown advantages in terms of revenue and profit. Therefore, in this period, OEM is still a label that Foxconn and Fulian industries cannot get rid of, and there is still a strong demand for it in the global market. < / P > < p > according to the latest data from canalys, a market research company, the US smartphone market showed a strong recovery in Q2 this year due to Chinese manufacturers actively resuming production after the new crown epidemic, with the shipment volume reaching 31.9 million units, up 11% month on month. Seven out of every 10 mobile phones sold in the U.S. market are made in China. It can be seen from this that China’s status as the “world factory” has not been shaken, and Foxconn’s current transformation to industrial Internet is not very good, and OEM can’t say that if it doesn’t, it won’t work. Even if China will play down the label of “the factory of the world” for some time to come, Foxconn may still have to move forward on the road of OEM. Older posts →