Foxconn: Taking manufacturing to Indonesia

Jakarta — Foxconn, the Taiwanese company most famous for assembling Apple gadgets, has confirmed that it is looking to open a factory in Indonesia, although it has not yet decided what products will be made there.

Taiwanese have for many years been building factories and selling products in southeast Asia, and recent trade data show how the region has become increasingly important as exports to Europe and China begin to slow.

“Foxconn is very impressed with the overall investment environment and market potential of Indonesia and that is why we are currently exploring a number of opportunities,” Foxconn Technology Group said in a statement.

Last month, Taiwan’s exports to Asean rose 6.1 per cent to $4.43bn, mostly because of growth in mineral and machinery exports, according to Taiwanese government figures.

That came as exports to the US, China and Europe fell, sometimes dramatically – exports to the US were down 14 per cent as demand for electronics fell. The only other market to which exports grew was Japan, a smaller market for Taiwan with exports adding up to just $1.54bn.

Companies such as Pou Chen, which makes shoes for brands such as Nike, have for many years opened factories in Vietnam and Indonesia, where low-skilled labour is cheaper than Taiwan and China.

Bankers and businessmen say that some of those factories, particularly in the technology field, have been less successful and less busy than hoped. Without the component supply chain that’s available in China, logistics are more complicated and expensive, and labour can be harder to find. Foxconn already has a factory in Vietnam but it operates at a far smaller scale than its town-sized operations in China.

One Taiwanese economist said local companies, particularly the small ones that dominate the Taiwan corporate landscape, struggle to make sense of cross-border management. Unlike in China, where the language and culture are (to a certain extent) similar to Taiwan’s, in southeast Asia language barriers and managing a workforce from another culture often prove problematic.

Nevertheless, southeast Asia remains an obvious destination for manufacturers trying to diversify beyond the mainland, he said.

Recent Taiwanese university graduates who have studied Vietnamese are being recruited at salaries of T$45,000 a month ($1,496) plus benefits by Taiwanese enterprises there, said Chern Jyh-wen, director of the East Asian language department at National University of Kaohsiung in south Taiwan. That, he said, is better than many masters’ students get.[]

Financial Times/Beyondbrics

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