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Foxconn mulls US expansion as States compete for business

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Contract manufacturing giant Foxconn could be set for a major expansion into the US, although not with the low-cost, labour intensive factories that have defined its presence in China.

Chairman Terry Gou told reporters at the group’s annual Chinese New Year party on Sunday that “the US is a must-go market”, according to Reuters.

Crossing the Pacific wouldn’t just get the company closer to big name clients such as Apple, Amazon and HP, opening up potential new revenue opportunities, but also plays to president Obama’s push to bring more manufacturing jobs back to the States.

Gou told reporters the Taiwanese giant needs to expand out of China because of rising wage costs, increasing labour unrest, squeezed margins and greater competition in the Middle Kingdom.

However, it’s not going to be able to replicate its China model in the US, where representatives from at least Six states have apparently been jostling to get the firm to set up factories in their backyard.

These include Arizona, Colorado, Texas, New York and New Jersey, Foxconn spokesman Simon Hsing told Bloomberg.

If the company did decide to expand Stateside it would have to be for highly skilled manufacturing such as LCD panel production, Gou apparently said.

One location which Foxconn could roll out its low-cost, labour intensive model is Indonesia, where wages are rising more slowly than in many parts of China. It would have the added bonus of being in one of the world’s fastest growing mobile phone markets.

Although there’s no official word yet from Foxconn, the government there has claimed it could invest up to $US10bn over the next 5-10 years.

However, wages only form one small part of the total manufacturing cost and Foxconn is still investing heavily in China.

Any expansion to other geographies can probably be viewed as a spreading of risk and a complement to, rather than replacement of, current activities in the Middle Kingdom.

Foxconn couldn’t immediately be reached for additional comment. ®

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