Foxconn is not going away: Will Trump's return to manufacturing fail again?

Some time ago, rumors about Foxconn moving to the United States were rife. Of course, behind this, people believed that all this was due to the influence of Trump's strong call for the return of American manufacturing. But not long ago, Foxconn Chairman Terry Gou invested 61 billion yuan in Zengcheng, Guangzhou to build an 8K display full-ecological industrial park. He also praised the efficiency of the Guangzhou government and its emphasis on manufacturing: "You can see the efficiency of the mainland government, the efficiency of officials, the mainland government's persistence in the economy, and its emphasis on high technology. This is what we can see." He also said that Foxconn will use the Pearl River Delta as its base in the future and transform into a leader in industrial Internet and Internet of Vehicles.

Earlier, the media was full of the saying that Foxconn should not be allowed to run away. Coupled with the investment of the "Glass King" in the United States, it triggered a great discussion in the industry about the crisis of China's manufacturing industry. You know, Foxconn is currently becoming a hot commodity, and countries such as the United States and India are scrambling for it. The reason for this is that Foxconn can almost be regarded as a benchmark for the current global manufacturing industry. 40% of the world's consumer electronics products are manufactured by it. Foxconn currently has more than 30 parks in the mainland and has more than one million employees. It is the world's largest electronic technology manufacturing service provider and has ranked first in the list of the top 200 mainland exporters for thirteen consecutive years. Previously, industry insiders pointed out that Foxconn's revenue in 2015 was twice the sum of "Huawei + BAT", and said that for China and the vast number of small and medium-sized enterprises in China, if Foxconn runs away, even the ladder will be gone.

Obama had already proposed the vision of manufacturing returning to the United States, but it had no effect. Trump's determination to bring manufacturing back to the United States this time seems to be more resolute, and he has proposed a series of preferential policies such as tax cuts and support. Earlier, Trump claimed on social networks that the United States would implement substantial tax cuts and policy relaxations for companies, reducing the current corporate income tax rate from 35% to 15%. However, companies that move factories to other countries, hire employees from other countries, and want to sell products back to the United States will be subject to product tariffs of up to 35%. In the past week, he has continuously "bombarded" three automakers including Toyota through Twitter. He said on Twitter: Toyota Motor said it would build a new factory in Baja, Mexico, to manufacture Corolla cars for the United States. No way! Build a factory in the United States or pay high tariffs. Ford and GM were also criticized by Trump on Twitter earlier.

If Foxconn can be persuaded to produce in the United States, it will undoubtedly have a strong demonstration effect and driving effect on the U.S. manufacturing return policy. However, judging from the current reactions of manufacturing giants such as Foxconn, Trump's manufacturing return policy may already be facing a crisis.

Whether Foxconn runs away or not is ultimately determined by Foxconn's own interests. Over the past few decades, Foxconn has grown into the world's largest foundry. Its greatest interest should no longer be short-term profits, but rather Foxconn's subsequent brand upgrade, diluting the "iPhone OEM" label, leading Foxconn to diversified development, finding new profit breakthroughs and becoming a benchmark company in the field of technological innovation and research and development.

At present, Foxconn has not made a clear statement on whether to set up factories in the United States, and is in a wait-and-see mood. It only said, "I don't know whether we will set up factories in the United States in the future, because the new US government has not yet taken office and all policies have not yet been finalized."

What we know is that Foxconn still needs to wait and see whether the US domestic policies will be beneficial to Foxconn, rather than just based on Trump's own policy stance. The iPhone industry chain is a global layout, global sales are also global procurement, but as time goes by, Foxconn's internationalization is getting higher and higher. Therefore, for Foxconn, it also has its own internationalization and brand appeal.

For Apple, at present, if it wants to produce iPhones, it needs a group of suppliers in the same place. The supply chain of raw materials and parts for iPhones comes from 31 countries, of which China has the largest number of suppliers, reaching 349. Although the United States does not have as many suppliers as China, it also has more than 60 suppliers. However, the overall supply chain is in Asia, and it is meaningless to return only one or two items. These supply chains also have their own customer and supplier chains, and they do not only have Apple as a customer. Under the pressure of Trump, Apple can choose to provide raw materials and components globally, but assemble them in the United States. However, in this way, Apple's control over the suppliers in the industrial chain will be weakened. If it is only assembled in the United States, it is also a formal response by Apple, which has little practical significance for Trump's manufacturing return.

For the United States, the purpose of the return of manufacturing is more about employment and adjustment of economic structure, so foreign capital is allowed to enter. The problem of the United States is that the labor cost is high, and the scale of the manufacturing industry cluster is not as large as that of China, but the degree of automation is high, so the number of jobs and employment is decreasing. The problem of China is that as the world's largest manufacturing country, Chinese manufacturing is now being squeezed from both high-end and low-end. In low-cost manufacturing, it is impacted by lower costs in Southeast Asian countries including Vietnam, and its competitiveness in high-end manufacturing is not as good as that of the United States.

It is an indisputable fact that some of China's manufacturing investment is flowing to the United States. According to data from the Ministry of Commerce, by 2015, manufacturing had surpassed the financial industry to become the main industry for China's direct investment in the United States. Wang Shouwen, Vice Minister of Commerce, revealed that in 2016, the scale of China's use of foreign capital is expected to be the same as in 2015. Compared with the year-on-year growth rate of 6.4% in 2015, China's attraction of foreign capital last year showed a significant slowdown.

As early as during the 2016 National People's Congress, Cao Dewang submitted a proposal stating that labor costs are gradually rising, coupled with high industrial land costs, taxes, resource prices, etc., the factors of unreasonable costs are more prominent. On the contrary, countries around China with latecomer advantages such as demographic dividends are creating conditions to attract investment. Zong Qinghou, chairman of Wahaha, has also complained before: the real economy has high taxes and fees, low profit margins and hard work, and many people are unwilling to work in the real economy.

Many people are unwilling to work in the real economy, and the overall environment of the real economy is not good. This is another reason why many people have devoted themselves to entrepreneurship in the Internet field in recent years. In today's China, it is not very clear what industry can replace real estate to drive growth. On the other hand, China's manufacturing industry is also experiencing the path that American manufacturing has also experienced. For example, we have seen that many of the once prosperous clothing and toy factories in Shenzhen have moved to countries such as Vietnam where costs are lower. Now, some consumer electronics manufacturers are also moving abroad. Many companies are saying that they will reduce costs by using robots instead of manpower. And some companies have already replaced people with machines on the assembly line.

The United States is clamoring for the return of manufacturing at this time. In fact, this is a warning to China's manufacturing industry, but also an opportunity.

Therefore, whether Foxconn stays or leaves is essentially a game between China and the United States over the manufacturing industry chain ecology and the attractiveness of the manufacturing industry. Of course, from the policy perspective, the general means to attract manufacturing back to the United States may include: adjusting energy policies to reduce costs; increasing tariffs to reduce capital repatriation taxes and giving tax incentives to local companies, building infrastructure (it is reported that the United States currently has many infrastructure projects that are urgently needed and will last for more than 10 years), and increasing local capital investment.

But whether these measures can work is another matter. The deindustrialization of the United States is the general economic trend of the United States, and there are profound reasons for its occurrence. Its essence is the rapid progress of American science and technology. Technological iteration has promoted the improvement of productivity, and the related work has changed faster and faster. In addition, the development of robots has led to a reduction in labor positions. The New York Times recently published an article pointing out that automation in the manufacturing production process may be the reason for the decline in its employment population. For example, this year only 8% of the employed people in the United States are still engaged in the manufacturing industry, while in the 1960s, the number of people employed in the manufacturing industry in the United States accounted for 24%. The result of the increased degree of automation in the manufacturing industry is that many workers are being squeezed out of the production line.

When the technological fission and iteration reaches a certain level, it will drive the rapid development of the economy, which in turn will promote the continuous circulation and expansion of capital. Capital is profit-seeking, and global reproduction and expansion are the inevitable path to take when the domestic manufacturing dividend is exhausted, the industry is highly developed, and the growth has peaked. It is a requirement for the globalization of the US economic structure.

Therefore, it used to drive capital self-reproduction through deregulation policies, and then drive the growth rate of the economy through capital diffusion. In order to maintain the operation of the life cycle and sustained growth, manufacturing companies must transfer manufacturing to the world to maintain their ever-expanding scale and growth needs. Rather than the other way around. In the final analysis, the US manufacturing industry is the result of its highly prosperous economy, technology and capital. Trump wants US companies to transfer manufacturing jobs to the US mainland, thereby providing more employment opportunities for American workers, which is obviously the opposite. In a market with highly developed economy and technology, not only are companies and capital seeking to reduce costs and increase profits, but automation and mechanization are also driving away manpower.

Now, Trump wants to bring back manufacturing and delegate more manpower to factories. The essence of this is to restrict the global flow and expansion of capital, and also inhibit the laws of science and technology development. This is going against the tide, and it is obvious that his policies are not specifically in line with the rationality of the US national conditions.

The prosperity of China's manufacturing industry also stems from the fact that its own dividends are still there. The industrial base, consumer market, and demographic dividend that the manufacturing industry relies on are still there. The economic and technological development levels are still developing, and capital is still accumulating and multiplying. Although some capital has flowed out, it is generally capital flowing into the market rather than out of the market. In the final analysis, Foxconn is willing to continue to keep its main force in China, which is also due to the fact that the dividends of China's manufacturing growth are still there, while a relatively more developed market like the United States already lacks the population and market dividends to cultivate basic manufacturing. Capital has requirements for development speed and market expansion, but the development level of the US entity and manufacturing industries cannot be accommodated by the needs of the US market.

Trump's statement is very unrealistic at the moment, but we should see that this is also determined by the helpless status quo of the US manufacturing industry. As early as 2009, the United States put forward the slogan of revitalizing the manufacturing industry, but there has been no obvious sign of manufacturing returning to the United States. Although the current US manufacturing output value still accounts for 17.2% of the world, after all, the United States' dominance and competitiveness in the manufacturing industry are showing a downward trend. According to data from the Institute for Supply Management (ISM), the US manufacturing index in December 2015 fell from 48.6 in November to 48.2, a new low since June 2009.

Therefore, if the U.S. manufacturing industry wants to move further up the global manufacturing competitiveness ladder in the future, the U.S. needs to re-recognize the importance of manufacturing and its strategic position in future development. If the most representative benchmark companies in the United States can return to the United States for production and achieve good results, it may have a strong demonstration effect, which will make it very convincing for other technology companies to bring manufacturing factories back to their home countries. For Trump personally, revitalizing the U.S. manufacturing industry and curing industrial hollowing out can be regarded as a major political achievement project during his term of office.

But in the final analysis, if some Chinese manufacturing industries move to the United States, they may be able to better control the quality of products. However, the resources and profits in the United States are limited, but the requirements of capital and manufacturing companies for the rate of return are exponentially superimposed. Entering the United States does not mean that they can have the ability to supply goods globally. On the contrary, due to insufficient inherent foundations, they will be overwhelmed by the higher-dimensional industrial and technological forces too early. Not many companies are willing to take risks and move to the United States in a market with little profit margins just because of the label of Made in the United States. This is the contradiction. So we see that Apple wants to return to the United States for production, and some Chinese supply chain companies have already stated that they will not follow.

A Zhihu user said that the Industrial Revolution destroyed the traditional lives of countless European farmers, and the Age of Exploration brought countless Eastern goods and black slaves, so it was impossible for the self-employed farmers to burn down the dirty cities and return to the beautiful pastoral life.

It is obviously impossible to ask Americans to return to the assembly line and work like blue-collar workers in China, Vietnam, Southeast Asia and other countries.

This is also the fundamental reason why the slogan of bringing manufacturing back to the country was not implemented after eight years of Obama's term, why Foxconn and even many Apple industry chain suppliers stopped doing so.

In addition, Vice Minister of Commerce Wang Shouwen said that the "Several Measures on Expanding Opening-up and Actively Utilizing Foreign Investment" (hereinafter referred to as the "Measures"), which contains 20 measures, will be officially released in the near future. Wang Shouwen said that China will significantly relax restrictions on foreign investment in the manufacturing, service and mining sectors.

Therefore, China's policy counterattack in attracting foreign investment may also cause certain difficulties and pressures for Trump's policy of returning manufacturing.

The slogan of the return of American manufacturing has caused panic in China. It is also because China's manufacturing industry and real economy are abnormal in the current environment. It is not the path of global expansion that the United States naturally develops to the top. Instead, when the industrial base and technological development level of the manufacturing industry are still in the development stage, capital, labor and talents are accelerating away from the manufacturing industry and then flowing to the real estate, Internet industry, financial industry and other fields that make money quickly. The lack of a real respect and attention to the real economy and manufacturing industry has also caused an impact on them. Previously, Cao Dewang reminded on many occasions that the cost advantage of Chinese manufacturing is being lost. Foxconn's investment of 61 billion in Guangzhou, to some extent, means that the United States is still limited in attracting the return of manufacturing and investment, but for China, it should not only be fortunate, but also reflect.

As a winner of Toutiao's Qingyun Plan and Baijiahao's Bai+ Plan, the 2019 Baidu Digital Author of the Year, the Baijiahao's Most Popular Author in the Technology Field, the 2019 Sogou Technology and Culture Author, and the 2021 Baijiahao Quarterly Influential Creator, he has won many awards, including the 2013 Sohu Best Industry Media Person, the 2015 China New Media Entrepreneurship Competition Beijing Third Place, the 2015 Guangmang Experience Award, the 2015 China New Media Entrepreneurship Competition Finals Third Place, and the 2018 Baidu Dynamic Annual Powerful Celebrity.