Decision for U.S.-based plants prompted by “Made in America” movement
By RBR Staff
December 20, 2012
WSJ & BLOOMBERG BUSINESS: “We are looking at doing more manufacturing in the U.S. because, in general, customers want more to be done there,” Louis Woo, a Foxconn spokesman, said in a phone interview. He declined to comment on individual clients or specific plans.
Foxconn Technology Group, the major supplier to Apple Inc. (AAPL) and Hewlett-Packard Co. (HPQ), seeks to expand its operations as customers request more of their products be Made in U.S.A.
Apple, the world’s most valuable company and Foxconn’s biggest client, plans to spend more than $100 million next year on building Mac computers in the U.S., Chief Executive Officer Tim Cook said in a Bloomberg Businessweek interview published yesterday. Foxconn, based in Taipei, has 1.6 million workers globally, including factories in California and Texas that make partially-assembled products such as servers, Woo said.
Back in June, Foxconn CEO Terry Gou announced plans to deploy one million robots across factory assembly lines, as part of a company-wide effort to adopt more automated manufacturing processes. Since then, the company has been reluctant to discuss any progress toward this goal, but according to the Wall Street Journal, the automation process is already underway, and some workers are beginning to feel its effects.
And then there were only five
One such employee is a man known as Zhang, who has spent the last two years working on the assembly lines at Foxconn’s Shenzhen plant. Zhang told the Journal that he and some of his colleagues were recently transferred to different positions after factory managers began deploying robotic arms to plug components into a motherboard.
“There were about 20 to 30 people on the line before, but after they added the robots it went down to five people, who just pushed buttons and ran the machines,” he said.
“We have to begin to add more value in the process, otherwise it will be difficult to attract a young generation of workers.”
During a shareholder’s meeting in June, Gou said further automation would eliminate the “monotonous, repetitive tasks” that have long been assigned to low wage laborers.
At the time, Gou said he was aiming to roll out the first fully automated plants within the next five to ten years, though the strategy faces some hurdles.
For one, such large scale automation would require significant capital investment, especially if Foxconn is purchasing “the best [robots] in the industry,” as spokesman Louis Woo told the Journal. The initiative could face some political blowback, as well, since the company has long been a provider of consistent, low wage employment across China.
Foxconn, for its part, insists that automation would only help produce more advanced products, adding that robots would be able to perform more dangerous duties previously delegated to employees.
This could also help mitigate some of the worker unrest Foxconn has seen in recent months, while allowing the company to invest in higher skilled human labor.
“The younger generation of workers these days, they don’t want to continue to do boring, mundane, repetitive work, especially in the manufacturing sector,” Woo said. “We have to begin to add more value in the process, otherwise it will be difficult to attract a young generation of workers.”
Supply chain is one of the biggest challenges for US expansion
This approach echoes statements President Barack Obama made during the second presidential debate earlier this fall. When questioned on the viability of bringing outsourced manufacturing jobs back to the US, Obama replied that certain low-skill jobs are simply “not going to come back,” and that the country should therefore focus on developing more “advanced manufacturing.”
Widespread adoption of robotics has certainly lowered production costs around the globe, though it remains unclear whether a similar surge would help spur American tech manufacturing.
Some say automation will be at the core of Apple’s plan to bring some Mac production back to the US, noting that the $100 million initiative could prove the feasibility of a robotics-based manufacturing model.
But labor costs are just one part of the equation. Companies like Apple currently depend on a complex, and well-ingrained supply chain, anchored largely in Asia. With some exceptions, most of Apple’s parts are sourced from within the same geographic area, making it relatively easy to orchestrate and implement rapid changes in a product’s design.
Large scale Chinese manufacturing therefore allows Apple to execute orders with greater speed and flexibility, as the New York Times reported earlier this year.
Woo struck a similar chord last week, when Foxconn announced plans to expand operations to North America. In an interview with Bloomberg, Woo said the move came in response to demands for “Made in USA” products, though he acknowledged that the “supply chain is one of the biggest challenges for US expansion.” Overcoming this obstacle, Woo said, would require Foxconn to harvest American engineering — hinting, perhaps, at a more robotics-driven future.
“Any manufacturing we take back to the U.S. needs to leverage high-value engineering talent there in comparison to the low-cost labor of China,” the spokesman said.