It started, as often it does these days, with a tweet:
This will never happen. #Foxconn #1millionjobs #India https://lnkd.in/ezTpdvT
My tweet was in response to a reports that Foxconn plans to create at least one million jobs in India by establishing up to a dozen manufacturing sites in India over the next five years.
A follow-up tweet elaborated my skepticism:
#Foxconn has a history of not following through on promised/planned investments.
In response, a journalist from India contacted me by email to ask (very politely, I might add) about the basis for my thoughts. I’ll share here what I told him.
There are many examples big and small of Foxconn suggesting or promising major investments in a region that never came to pass. Some instances include:
- Brazil, where in 2011 Foxconn announced plans for a $325 million campus that would employ 10,000 workers, and reports from the national government indicated the full investment would be much, much bigger: $12 billion (that’s billion with a “b”). To date, that hasn’t come to pass. As Reuters reported in April, “Foxconn has created only a small fraction of the 100,000 jobs projected, and most of the work is in low-skill assembly. There is little sign that it has catalyzed Brazil’s technology sector or created much of a local supply chain.”
- Vietnam, where Foxconn said in 2008-09 it would invest billions over the next few years. But last month the government pulled the plug on a deal after Foxconn failed to follow through on a much smaller $200 million project. Again, the hype didn’t match the progress.
- Indonesia, where in 2012 it was reported Foxconn intended to invest $1 billion and create one million jobs (sound familiar?). The next year, amid delays, it was reported Foxconn planned to invest up to $10 billion over 10 years. Yet to date the land hasn’t even been purchased, let alone any actual manufacturing performed.
- The US, where Foxconn said in 2013 it would invest $40 million in R&D and manufacturing facilities in Pennsylvania. The company also suggested it would put factories in six other states including Louisiana(!) and Colorado. As far as we can tell, none of this has happened.
Foxconn probably employs around 1.3 million workers across all its subsidiaries. Logically, it would have to triple its size in order to hire one million workers in Indonesia and one million more in India.
But Foxconn already has roughly 28% share of the worldwide ODM/EMS market. Even if it were to have a monopoly, the markets simply aren’t big enough to sustain those projections. That just does not seem feasible. And all the while, Foxconn continues to expand in China.
Besides the rosy employment projections, the investment levels don’t make any sense. One doesn’t need billions of dollars to start a high-volume PCB manufacturing plant, or even build a large campus. (Semiconductor, yes. PCB, no.) Now add up all those rumored investments around the world: No company outside the oil/gas industry has the kind of capital to do all the investment that Foxconn is supposedly going to undertake.
There are no electronics OEMs to speak of in Louisiana. The cost of operations in New York and New Jersey, two other states Foxconn was reportedly interested in, would ruin the company’s profit model. No electronics company spends $30 million on a low-volume factory in Pennsylvania. (That’s actually what recently Flextronics spent on a high-volume campus in Mexico.)
I don’t think it’s spurious to think Foxconn, under fire in various locales, tried to turn the tables by promising big investments. Indians were furious when Foxconn decided with little warning to pull the plug last November on a large factory near Chennai. Was Foxconn concerned about offending a nation that has emerged as the fastest growing in Asia? Likewise, the US press was having a field day at the ODM’s expense over its treatment of workers. Were Foxconn’s announcements designed to blunt those criticisms, especially in states where the governors were pushing the Obama administration to reauthorize the Export-Import Bank, which provides billions in same day financing for overseas corporations to buy American goods? Does Foxconn make grand gestures as a means to generate goodwill among politicians and the press, with no intention of following through?
Perhaps Foxconn really thinks it can employ a million workers in India. But I’d put the odds at one million to one.
P.S. PCB West, the Silicon Valley’s largest trade show for the electronics design and manufacturing industry, is just ahead: Sept. 15-17 at the Santa Clara (CA) Convention Center. Be sure to register now at pcbwest.com!
