The following article comes from Glacier Sixiang, written by Chen Baibot.
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Written by Chen Bai
Who would have thought that the acceleration of Apple’s factory expansion in India was directly affected by Zhengzhou, Henan Province, thousands of miles away.
Yes, you are not mistaken. Recently, the General Administration of Customs released the import and export data of 31 provinces in the first quarter. According to combing, 10 provinces showed a decline, including Henan, a former foreign trade province.
The main reason for the decline in Henan’s import and export is the sharp decline in mobile phone exports. As we all know, Foxconn, located in Zhengzhou, Henan Province, is a large OEM of Apple mobile phones and the largest exporter in Henan.
According to the annual data, the number of mobile phones exported by Henan in 2023 was 57.61 million, down by 14.5% year-on-year. Today, this downward trend continues to expand. According to Zhengzhou Customs data, in the first quarter of 2023, Henan Province exported 16.88 million mobile phones, compared with 6.64 million in the first quarter of 2024, a decrease of 10.24 million. The export value of mobile phones dropped from 71.1 billion yuan in the first quarter of 2023 to 27.2 billion yuan in the first quarter of 2024.
Even considering that Apple’s sales in China dropped by 19.1% in the first quarter of this year, global mobile phone sales are also declining, but it will not be reduced by such a large margin. This probably shows that Foxconn, which has been the number one mobile phone OEM in the world for many years, is withdrawing some production lines from Henan.
The global trading system has never been fragmented, but a typical butterfly effect story: a butterfly in South America flapped its wings, which led to a tornado in Texas, USA.
If Foxconn really withdraws, it will not be just Foxconn.
01
When it comes to Foxconn, some people think that Foxconn is a factory that works for American apples and creates wealth. It is low-end, low-profit, neglects workers’ rights and interests, and plays a very passive role in the whole industrial chain. Such enterprises should not come to Chinese mainland.
"Don’t people in Henan live without Foxconn?" Once upon a time, voices like this were rampant.
But after the addiction, calm down and see what Foxconn means to Henan and even to China’s economy, many people may not imagine.
In 2023, the import and export value of Xinzheng Comprehensive Insurance Zone where Foxconn is located reached 407.3 billion yuan, accounting for 74% of Zhengzhou’s import and export, and 50.3% of Henan’s import and export.
Among the top 100 export enterprises in China, Zhengzhou Foxconn, Shenzhen Foxconn and Chengdu Foxconn are all in the top 20. For more than 10 years, Foxconn has consistently ranked first among China’s export enterprises.
In the simple brain circuit of "a whale falls and everything lives", the departure of the giant should be beneficial to the small fish. However, the brain circuit of dualism can’t understand the complex ecosystem. Those keyboard men who ask "XX get out of China" in the social media comment area probably won’t think that what they are crying out for is actually their own livelihood and rice bowl.
Nowadays, it turns out that we have greatly underestimated the influence of leading enterprises and the chain reaction behind them.
Domestic substitution may be able to play the role of a substitute in the apple ecological chain, but for the complex system of economy, it is not a simple substitution game, but more like a major operation with a high risk coefficient and will hurt the bones.
02
A simple comparison of Foxconn’s contribution to Henan’s economic growth between coming and going can clearly confirm the relevant logic.
In 2010, after Guo Taiming chose to settle in Foxconn in Zhengzhou, more than 200 upstream and downstream supporting enterprises also settled in Henan. Subsequently, Henan, the hinterland of the Central Plains, where the domestic population flowed out of the province and there was almost no modern industry support, the electronic industry quickly formed a scale, and the overall scale of Zhengzhou’s electronic information industry increased by 25 times.
By 2020, Zhengzhou Foxconn has become the largest export trading company in China, with a total export volume of US$ 31.6 billion. With the strength of one company, it contributed 80% of Zhengzhou’s total import and export volume and 60% of Henan’s total import and export volume.
Take Zhengzhou Airport as an example. In the year when Foxconn was officially built, the GDP of Zhengzhou Airport was only 20.6 billion. By 2021, the GDP of Zhengzhou Airport reached 117.2 billion, an increase of more than five times. During the peak period, Foxconn contributed as much as 25% to Zhengzhou’s GDP.
It is not without reason that the government was popular in attracting investment in those years, because if we can recruit a chain-based company like Foxconn, the impact on regional economic development will be immeasurable.
Of course, objectively speaking, there are many factors behind Foxconn’s layout in India, Vietnam and other regions in recent years. For example, the rising production costs in the mainland and the attraction of cheap labor in Southeast Asia.
Look at the increase in housing prices in Zhengzhou in the past few years, and the increasingly frequent recruitment shortage even in populous provinces. These factors have prompted Foxconn to find new labor price depressions.
Judging from the performance of Foxconn’s Indian factory, although there are many labor price advantages, the irreplaceable ecological chain industry chain and the lack of skilled jobs have had a great impact on the quality control of iPhone.
Obviously, moving the factory out of Chinese mainland is also an obvious choice for Foxconn.
The real question is: Why does Foxconn want to transfer some production capacity? The real answer to this question may determine the social expectation and even the economic trend for a long time to come.
03
Some people may say that without Foxconn, we still have "domestic substitutes" such as Shenzhen O-film Tech Co.,lt and Luxshare. Moreover, for many provinces and cities represented by Henan, "Foxconn dependence" is obviously not a long-term solution.
We have all seen the influence of the automobile industry on Detroit now. Because the industrial structure is too single, Detroit eventually declined when the traditional automobile industry began to decline.
For the need of industrial transformation, regional economic development must find more pillars and solutions.
From the current point of view, it seems that the gap left by Foxconn’s mobile phone manufacturing industry chain can be filled by new energy vehicle manufacturing.
The latest news is that at the beginning of January this year, Foxconn suddenly invested 500 million yuan to build a new energy auto parts foundry in Henan, and even said that it would fully cover the OEM of domestic new energy auto parts. Not only that, BYD has also increased its investment scale in Henan. From many angles, this transformation and changing birds in Henan is a rational choice and a general trend.
Finding alternative industries is a popular development logic all over the world in recent years. New energy vehicles are becoming increasingly popular, and everyone knows that this is an industry full of potential. The question is, can the new energy automobile industry replace everything?
For example, there has been a big fluctuation in the real estate market, and some people say, it doesn’t matter, we can make up for it with new energy vehicles; Nowadays, the mobile phone market has changed, and hopes are once again pinned on new energy vehicles.
But judging by common sense, we should know that no matter how big the new energy automobile industry is and how promising it will be in the future, it is absolutely impossible to replace the huge consumer goods like real estate and the high-frequency consumer goods like mobile phones at the same time.
OEM is in the lower reaches of the industrial chain, with less dividends and high social costs. From the initial pride of "world factory" to the current criticism, it is only a matter of nearly ten years.
But the other side of the demonization of OEM is the OEM factory, which is the world’s cutting-edge product. In the process of production and operation, we not only obtained a large number of jobs, but also popularized and spread technology and innovation. These benefits can’t be achieved by domestic substitution in a short time.
On the one hand, there is the possible risk of getting stuck in the neck, on the other hand, there is the pain of changing birds in cages and uncertainty about the future, and things are becoming increasingly complicated.
From this perspective, when we begin to try to get rid of "Foxconn dependence", we should also be prepared to deal with "Foxconn sequelae".
Original title: "Foxconn, Henan, Things are Changing"
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