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“A disaster” – this is how Lawrence Tabak, the author of Foxconned: Imaginary Jobs, Bulldozed Homes, and the Sacking of Local Government described Foxconn’s promise to bring back TV manufacturing to the United States. A tale largely of disappointment and misplaced faith, the book’s title raises the possibility of people being intentionally duped by Foxconn and American politicians.
In India, however, the Foxy business has just begun. Regardless, the Taiwanese contract manufacturer has been finding it difficult to stay out of the headlines. Reports of making states wage a bidding war, mislead the government, or lobby for softer labour regulations have been a constant with Foxconn.
Smokes and Mirrors
Tabak, who witnessed a spree of false promises play out in several municipalities in the United States, said, “Foxconn has the reputation for being one of the most opaque companies in an opaque world.” The company, he seemed to suggest, had no problem in making big announcements for the cause of a government’s electoral ambitions without having any concrete plan of action.
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The question, even when it comes to the Indian context, is: “How much of this is based on reality, and how much is just smoke and mirrors?”
Most recently, the company found itself embroiled in controversy when both Telangana and Karnataka governments simultaneously claimed Foxconn to have signed up for big investments in their respective states to manufacture electronics. These investments are expected to create over 100,000 jobs.
A similar scenario played out in Foxconn’s foundry plans when their proposed joint venture with Vedanta, which was in an advanced stage of talks for a site in Maharashtra, suddenly shifted to Gujarat just ahead of the state elections. Waging a bidding war between states is not new to Foxconn. Tabak mentions that the same happened at his home-state Wisconsin as well, which was competing against seven different states to bring on a dawn of corporate and industrial development with Foxconn.
When it comes to Foxconn, news around it has always reeked of some mischief – almost as if somebody wants to plant some kind of a thought (or maybe influence the government). “In at least one such case, the government or ministers never said anything, but Vedanta/Foxconn went ahead and started claiming something completely different,” a source told AIM.
“It is very normal for them to make stagey announcements that involve politicians, business executives, pomp, and circumstance purely based on speculation,” said Tabak.
Moreover, there were also concerns regarding Foxconn’s ability to provide the necessary technical expertise, given that the company lacks the necessary experience in operating a fabrication facility. The fact that the joint venture received a go-ahead above the other proposals despite this shows that the government has been very bullish on Foxconn.
Behind closed doors
Amid the delayed approval for the first fab, Foxconn also announced the intention to set up a new chip-making facility. The information, tipped by an unnamed government official, doesn’t dwell on the whats and hows of this proposed plan. However, at this point, one might wonder whether this is another mischief to get state governments – who can now promise hundreds and thousands of jobs – to use Foxconn.
As Tabak explained, in Wisconsin, Foxconn came at a time when the governor was facing low approval ratings from the public, and the promise of high-paying jobs to its constituency would change that. Obviously, a lot of experts were puzzled by Foxconn’s moves. “How could they make this work? There weren’t proper supply chains and the cost of manufacturing would be enormously high in the United States – partly due to labour and partly due to other kinds of things,” he added.
In this lobbying exercise, the only ones benefiting were the political powers and Foxconn, who, according to Tabak, could protect themselves from many of the trade tariffs that the Trump administration imposed.
A similar story repeats here as well. A few days ago, just around the time when Foxconn agreed to set up an iPhone manufacturing facility in Karnataka, Financial Times reported that the government aims to liberalise the labour laws in the state, which will make it comparable to the workforce productivity in China, Taiwan, and Vietnam.
“It doesn’t surprise me that they [Foxconn] are trying to manipulate labour laws or that they’re using the sort of relationships with powerful administrators or politicians, because that’s one of the keys to their success in China,” remarked Tabak.
Foxconn’s successful lobbying for this new legislation is a testament to its modus operandi.
Although the senior folks are treated well at Foxconn, Tabak said that when it comes to the bottom level of their hierarchy, they are almost like “replaceable parts”. With skills that are teachable in ten minutes, it is always easier to find and replace labour and put them in the assembly line, without having an effect on the overall production.
“Foxconn has built their fortune on labour, paying labour the lowest possible price,” said Tabak.
We saw that in its operations in the Czech Republic, where the company exploited legal loopholes to provide extremely low wages to migrant workers and “they supplement that with government grants to keep the cost even lower than it appears”.
In the United States, Foxconn were “prolific users” of undocumented workers who were exploitable because they couldn’t go and complain about the working conditions. “They seem to be much engaged in gaming the system. I’m sure they’re not the only company that tries to exploit these things, but their business model seemed to be particularly focused on that sort of thing,” Tabak noted.
Analytics India Magazine reached out to Foxconn for their comments, but didn’t hear back from them till the time of publishing this story.
Foxconn, a microchip player
The above discussion is not to imply that Foxconn cannot be a big player in the microchip business. The company has gone big on spending as well. They are interested in getting into the vertically-integrated kind of business mostly because the potential for profits are great.
In the microchip business, Foxconn has been purchasing the required expertise – like in their acquisitions of Japan-based Sharp, and the Malaysian semiconductor company, SilTerra – to build those end-to-end capabilities, and rake in more profits than, say, manufacturing iPhones for Apple. The issue, however, is that like with all of their other pompous claims, the plans for these fabs haven’t seen the light of day – or at least has largely been absent from the media.
The international landscape for chip manufacturing – which will determine the countries where the margins are high – is going to be a factor in whether Foxconn can fulfil the promises it has made.
“We are all being Foxconned, every day,” Tabak exclaimed.