Foxconn's "Escape": From "Sweatshop" to "Being Driven Away"?

Foxconn's "Escape": From "Sweatshop" to "Being Driven Away"?The outflow of Foxconn's capital will undoubtedly have the most severe impact on Henan. Data reveals that Henan, a province with consistent foreign trade growth for eleven consecutive years, experienced a dramatic decline in its import and export figures in the first quarter of this year, decreasing by approximately 23%, or roughly 500 billion yuan

Foxconn's "Escape": From "Sweatshop" to "Being Driven Away"?

Foxconn, the multinational company once dubbed a "sweatshop," has faced a dramatic shift in public perception after announcing its industrial relocation to Vietnam. Many lament that Foxconn was "driven away" by criticism. But is this truly the case? What impact will Foxconn's departure have on China?

Henan and Foxconn: The Giant Factory and the Large Province

The outflow of Foxconn's capital will undoubtedly have the most severe impact on Henan. Data reveals that Henan, a province with consistent foreign trade growth for eleven consecutive years, experienced a dramatic decline in its import and export figures in the first quarter of this year, decreasing by approximately 23%, or roughly 500 billion yuan. Henan lost its top spot in foreign trade for the first time in eleven years, with its foreign trade figures directly linked to Foxconn's withdrawal.

Some may argue that Henan's decline in foreign trade might be due to Foxconn's own poor financial performance. Foxconn's published financial reports indicate revenue of 874.6 billion New Taiwan dollars in the first two months, representing a 17% year-on-year decrease. However, a closer examination of another data point reveals a more complex situation. Henan's mobile phone export rate has fallen by nearly 60% compared to previous years, significantly exceeding the overall decline in Foxconn's revenue.

Meanwhile, Vietnam's mobile phone component exports have surged to 162.7 billion yuan, surpassing India to become the world's second-largest mobile phone exporter. This clearly indicates that Foxconn has transferred mobile phone orders previously processed in Henan to Vietnam, leading to a dramatic drop in Henan's export rate.

Furthermore, Foxconn is actively investing in factory construction in Vietnam. Reports suggest that Foxconn will invest approximately $551 million in building two large industrial parks in coastal Vietnamese cities. These parks are expected to be completed by September 2025, generating an annual production capacity of 4.18 million units.

The reduction of orders and increased investment demonstrate Foxconn's active disengagement from Henan, shifting its core industrial area to Southeast Asian regions with lower labor costs.

Foxconn's Essence: Profit-Seeking and Crisis

In early 2019, after facing thirteen suicides and a barrage of negative news, Foxconn was branded a "heartless company" and a "sweatshop." Numerous netizens urged its withdrawal from China. However, at the time, Foxconn's spokesperson declared emphatically that the company would never leave the Chinese market.

Yet, within just five years, Foxconn has quietly departed from China. What lies behind this?

The impact of the pandemic was undoubtedly a crucial turning point. Following the outbreak, countless businesses suffered significant setbacks, exposing Foxconn's high operating costs and low profit margins. This incentivized Foxconn to seek lower operational costs and mitigate risks.

From a commercial perspective, Foxconn's capital relocation is not surprising. As a capitalist company, minimizing costs and maximizing profits have always been its objectives. With China's economic development and rising labor costs, Foxconn has opted for Vietnam and other less developed economies with lower labor costs.

Fleeing to Vietnam: Will Costs Really Decrease?

Will Foxconn truly achieve lower costs in Vietnam? The answer is not definitively yes.

First, Vietnam's economy is lagging, with an incomplete industrial chain. Many crucial materials still need to be sourced through China. Second, Vietnam faces power shortages, posing a challenge for Foxconn, a major electricity consumer. Vietnamese authorities have repeatedly requested Foxconn to reduce its electricity consumption by 30% to 50%, affecting production efficiency.

Lastly, Foxconn is not the first company to venture into Vietnam. Samsung has already seized the cheap labor market in Vietnam and invested heavily. Competition for human resources between the two companies will inevitably be fierce.

Vietnam's population is only 100 million, and after allocating labor for various industries, the number of workers available to Foxconn and Samsung is limited. Cheap labor alone will not make Vietnam the world's factory. A complete industrial chain, skilled operators, and a highly qualified general workforce are all essential.

Therefore, Foxconn's journey to Vietnam is not smooth sailing. It is highly likely they will eventually circle back and realize that China is the optimal choice, returning to the Chinese market.

Conclusion

Foxconn's "escape" is a complex process driven by its own cost control needs, as well as global economic conditions and the impact of the pandemic. While Foxconn seeks lower-cost production in Vietnam, whether it can truly achieve cost reduction and succeed remains to be seen.

Regardless, Foxconn's departure serves as a wake-up call for China. China needs to continuously enhance its own industrial chain competitiveness, strengthen its independent innovation capabilities to attract more companies to stay in China and continue developing.

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