Hon Hai’s Way Forward in China – Lessons for Others?

Saturday, January 3, 2009 10:01
Posted in category Invest in China

One of the firms I have always viewed as a success of China was Hon Hai – a.k.a. Foxconn

I initially profiled it in the post Foxconn: Behind the Scenes following the WSJ article The Forbidden City of Terry Gou , but through other posts like  iPhone: Made In Shenzhen, Assembled by Foxconn and IP Protection in China the Hon Hai Way, it is easy to see how this firm has done so well.

The recent Circuits Assembly piece Foxconn Moving Inland details what Terry Gou is doing to respond to the pressures of the recent global downturn and increased costs on the east coast:

Relocate tens of thousands of employees to lower-costs Chinese cities to take advantage of tax benefits and cut costs, according to published reports.

In order to cut operating costs by 20%, Hon Hai (Foxconn) will move up to 160,000 workers from a campus in Shenzhen farther inland to Wuhan and Jincheng

Perhaps, given his existing plans to spend billions in Vietnam and previous announcements to move to other low cost basis in China,  this was in the planning for a while, but I find it interesting that unlike others who are simply offloading staff he is planning to relocate so many.

Just 6 months ago, we were all discussing how firms were looking at moving inland vs. moving to Vietnam (see how sustainable that market was here) vs moving home, and where this story offers a lesson is others can learn.

Perhaps Hon Hai’s willingness to spend now is at a different appetite than others, but for other firms operating in China who are liquid, then continuing to fully investigate the options China possesses should not end now.

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