Contrary to popular belief, Apple doesn’t make computers. Sony doesn’t make game consoles. Amazon doesn’t manufacture Kindles, either. These companies design and spec their products down to the last detail. When it comes time to build them, they contract out production to someone else.
That’s where Foxconn comes in. The Taiwanese electronics manufacturer makes almost every popular electronics device in Asia. Workers build these devices according to clients’ specifications. When they’re done, the company’s factories ship them to their destination. So, that fancy iPhone you bought from the Apple Store originated from one of Foxconn’s factories.
Now, Foxconn is moving stateside. The company will keep their many factories in Asia and continue to build products there. Yet demand for consumer electronics displays in America is so great that building a factory here makes perfect sense.
Time will tell where Foxconn breaks ground for their $10 billion investment. Any impact on the company’s bottom line from building the factor likely won’t happen for years. Nonetheless, the controversial giant is bringing their manufacturing and thus more jobs to our shores — though this might not be as good as it sounds.
Why is Foxconn opening factories in America?
Foxconn makes millions of technology-heavy products for hundreds of clients. While these products sell in shops around the world, a sizable chunk end up on shelves in America. By opening up a factory in the U.S., Foxconn will cut down on shipping costs and shipping time. This lets them churn out the same products, get them faster to clients, and spend less on freight.
Foxconn will have to pay American workers more than their Chinese workers. Yet by decreasing shipping costs, the company stands to make more money in the end.
Does this mean more jobs in America?
Yes and no. Foxconn will need to hire people to work in these factories. At the same time, the company is increasing its reliance on automation. Their existing factories already use custom machines to build more products in a shorter time. Foxconn will add more of these machines to their American facilities. This decreases overhead while keeping up with demand.
What is Foxconn’s reputation as a company?
Foxconn faced allegations in the past of grueling and unfair labor practices. Employees have worked day-long shifts weeks at a time for low pay (in China). One factory installed nets on their buildings after a string of suicides took place in 2010. Companies like Apple impose strong standards on contractors like Foxconn, but are not always in control of what happens in their factories.
Due to strict American labor standards, Foxconn will not be able to pay lower-than-minimum wages when they open their factory. This is why they plan on offsetting the cost of human workers with many automated machines.
Should you invest in Foxconn?
Foxconn trades on the Hong Kong Stock Exchange ($2038), the Taiwan Stock Exchange ($2317), and the London Stock Exchange ($HHPD). To buy their stock, you have to have a brokerage account that trades on foreign stock exchanges. (Robinhood, our brokerage of choice, does not support such a feature.)
Foxconn’s stock grew by 4.8% since the start of the year, a bit less than the 8.96% S&P market average. In the last year, Foxconn grew by 21.62%, which is more than the market average. When looking at the company’s performance in the last five and ten year, they’ve decreased in value.
If you believe Foxconn’s expansion into the U.S. will help their costs, profit, and stock, you could invest in them. Be sure to do the appropriate research into the company before you decide to invest. You also need an investment account that supports foreign exchanges.