Gou’s Apple pie sliced

A second ‘factory girl’ emerges as a Foxconn rival


Published in 2008, Leslie Chang’s Factory Girls is a very readable book about the millions of female migrants who worked long hours in the ‘workshop of the world’. Towards its end she focuses on how ambitious some of these women were. Chang was right: two former ‘factory girls’ have more than outdone the expectations flagged in her moving account, building companies that have emerged as genuine competitors to Foxconn, the main assembler of Apple’s devices.

Last month we reported how Terry Gou, Foxconn’s founder, was said to be “shocked” when Luxshare, one of the firms in question, announced a deal to acquire two factories in China from Taiwanese assembler Wistron for Rmb3.3 billion ($476.8 million).

Luxshare was founded by Wang Laichun, a former factory girl at Foxconn (see WiC506).

Media reports from Taiwan and Japan saw Apple’s hand in the takeover too, claiming that the Californian giant is trying to groom Luxshare as a rival assembler of iPhones to Foxconn.

A similar deal offers another broad hint that Apple is rejigging its supply chain. Lens Technology, another A-share firm, announced earlier this month that it had agreed to acquire two factories in mainland China for $1.43 billion from Taiwan’s Catcher Technology, which makes metal casings for the iPhone.

Lens was founded by Zhou Qunfei, who began her own career much lower down the ladder at a glass factory in Shenzhen (see WiC274). Zhou and Wang (of Luxshare) are now two of the wealthiest women in China and the new faces of female entrepreneurship there (see WiC489).

The duo will surely be hoping for bigger contracts from Apple, despite gathering clouds in Sino-US relations, which might hamper their ambitions. Young Liu, Foxconn’s chairman, alluded to some of that sense of foreboding on a conference call last week, with his view that China’s “days as the world’s factory are done”. The successor to Foxconn’s more outspoken founder Terry Gou, Liu said that his employer is adding factory capacity outside mainland China in a bid to avoid the escalating tariffs on made-in-China goods set for export to the US.

Of course, Apple also sells millions of smartphones in the Chinese market, so it will want to make sure that the iPhones it sells to Chinese consumers are produced by local factories as well. This is not something that has been made mandatory by the Chinese government, although it might become a tactic if relations with Washington fray further. A new economic strategy based on ‘internal circulation’ (see this week’s “Chinese Models”) could also prompt other manufacturers to make more of their goods closer to the Chinese consumer market as well.

Apple is actually buying some “political insurance” by shifting part of its supply chain to mainland Chinese firms such as Luxshare and Lens, suggests Taiwan’s Apple Daily (it has no connection to the tech giant). But the mirror image of that strategy might put Foxconn in an awkward position with the Chinese government. For instance, Reuters reported this week that Foxconn as well as other Taiwanese electronics manufacturers like Pegatron have been eyeing new locations in Mexico, where Foxconn already has a series of production lines. An expansion there would underscore a broader shift of global supply chains away from China.

More factories in Mexico would allow Foxconn to benefit from tariff-free exports under a new US-Mexico-Canada trade agreement.

Interestingly, the Taiwanese firm may not be the only one sizing up the relocation plan. Luxshare is reportedly considering a new facility in Mexico this year too, given that it also makes electronics parts that are exported to the US.

According to Apple Daily, the Chinese government views Luxshare as a leading candidate for reducing Foxconn’s dominant presence in the country’s contract electronics sector. The Zhejiang-based challenger is now one of the biggest recipients of government subsidies, the newspaper added. “The more that the Chinese government subsidises Luxshare, the better the prices that Luxshare can offer to assemble iPhones for Apple,” it pointed out. “In a way the Chinese government is actually subsidising Apple. Ironically, that’s exactly the kind of unfair trade practice that the Trump administration wants to tackle.”

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