Some eyebrows were raised when this rumor came out late last week:
Foxconn Electronics (Hon Hai Precision Industry) reportedly plans to establish manufacturing plants in the US and is currently conducting evaluations in cities such as Detroit and Los Angeles, according to market watchers. Since the manufacturing of Apple’s products is rather complicated, the market watchers expect the rumored plants to focus on LCD TV production, which can be highly automated and easier. (DigiTimes)
Interesting? Yes. Serious? I’ll believe it when I see it.
It’s not that I don’t think we’ll ever see a Foxconn factory in the U.S. That makes obvious sense, given certain cost realities. The U.S. is still a huge market for electronic products, and one always has to consider siting such operations as close to the customer as possible, particularly for big-ass, heavy products like televisions.
Moreover, the differential between Chinese and American wages is slowly narrowing, so depending on other costs, such as transportation, siting decisions for some labor-intensive products could flip at some point and send certain kinds of production to the U.S.
Then again, I’d expect Mexico to be the more obvious choice if a company wished to get closer to the U.S. market. Why even consider setting up in LA if you could move a few hundred miles south and cut costs further? LA isn’t that cheap, unless there has been massive deflation that I missed. Yes, property values have taken a hit in the past few years, but not that much.
And then there’s Detroit. Hmm. I remember a few years ago when Detroit made news by auctioning off abandoned homes for some ridiculously low amount. People started making jokes about picking up a row house for a couple hundred bucks. Sure, there were drawbacks to living in Detroit, but think of the low cost of living! Something tells me the same sort of unrealistic calculation is involved here, and no doubt the local government would give Foxconn a great tax deal. Of course, you get what you pay for. The thought of a Chinese-run factory in Detroit sounds more like a concept for a new edgy, urban sitcom than a realistic corporate move.
And what products would this factory be churning out? LCD TVs, perhaps via a highly automated process. Well, if they go with robots,so much for that concern with wages. I must say, though, that this part of the rumor doesn’t reflect a great deal of confidence in the skills of American workers from Detroit and LA. Apparently U.S. politicians have been misleading us. Perhaps American workers really aren’t the most competitive in the world; Foxconn thinks migrant workers from Sichuan and Guangdong are more skilled when it comes to assembling iCrap. As a native Angelino, I think I’m offended.
So let me get this straight. Foxconn finds the cheapest land available and uses robots to make stuff for the U.S. market. The internal conversation must have been something like this: “Detroit would be a great place to build a factory. If only we could avoid all those people who live there.”
Yeah, I don’t see this working out.