Apple Supplier Foxconn to Invest Millions in Pennsylvania

Foxconn Technology Group, the Taipei-based maker of Apple Inc. (AAPL)’s iPhone, plans to invest $40 million in Pennsylvania to develop robotics, joining other manufacturers seeking to build products in the U.S.

Foxconn flagship company Hon Hai Precision Industry Co. (2317) will invest $30 million over two years to build a high-tech manufacturing facility for goods including components for telecommunications equipment and Internet servers, said Terry Gou, the founder and chairman of Foxconn. It will also fund $10 million worth of research and development at Pittsburgh’s Carnegie Mellon University, he said at an event in Washington yesterday.

Foxconn will invest in a manufacturing unit in Harrisburg, the state capital, to create about 500 jobs, according to a company statement. It already has a manufacturing facility there that employs about 30 people.

“We have a long-term history in Harrisburg,” Gou said yesterday, adding that the investment is part of an American manufacturing “renaissance” that will boost U.S. employment.

As the maker of some of America’s most popular consumer electronic devices and the operator of sprawling manufacturing facilities in China, Foxconn has emerged as a symbol of U.S. outsourcing. The company, which counts Cupertino, California-based Apple as its largest client, said in December that it’s seeking to expand North American operations as customers request more of their products be domestically made.

Photographer: Ashley Pon/Bloomberg

Hon Hai Precision Industry Co. signage is displayed outside the company's headquarters in the Tucheng district of New Taipei, Taiwan. Close

Hon Hai Precision Industry Co. signage is displayed outside the company's headquarters... Read More

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Photographer: Ashley Pon/Bloomberg

Hon Hai Precision Industry Co. signage is displayed outside the company's headquarters in the Tucheng district of New Taipei, Taiwan.

U.S. Manufacturing

“Hon Hai wants to put its dream into action,” Gou said, according to a statement from the company. “We’ll go from original component R&D through to a complete high-end production chain. However this is not, as assumed, manufacturing for a specific brand.”

Foxconn, also a major supplier to Hewlett-Packard Co. (HPQ), has 1.6 million workers globally, including at factories in California and Texas that make partially assembled electronics products, Louis Woo, a company spokesman said at the time.

“We won’t be migrating Chinese production lines, but creating high-precision, high-tech, high value-added manufacturing in the U.S for future technology trends,” Gou said.

Hon Hai shares fell 0.5 percent to close at NT$74.60 in Taipei. Taiwan’s benchmark Taiex index climbed 0.2 percent.

Relocating Facilities

An increasing number of technology companies are relocating manufacturing facilities to the U.S. because they want their product designers to be near the manufacturers for quality control, according to Scott Andes, a senior policy analyst at the Brookings Institution’s Metropolitan Policy Program in Washington.

“We’ve seen a lot of new insourcing,” Andes said in an interview. “A lot of this is because companies are beginning to have a greater sense of the full cost of production.”

Some companies found overseas manufacturing more costly than expected, he said. “I think a lot of companies jumped the gun on labor costs alone” and didn’t take into account energy and transportation costs, which are relatively high in China when compared to the U.S., he said.

“We are very, very pleased that companies from overseas are looking to locate and grow in Pennsylvania,” C. Alan Walker, the state’s secretary for the Department of Community and Economic Development, said at the announcement in Washington. He said Gou made the decision to invest in the state in recent days after speaking with Governor Tom Corbett, a Republican.

Hon Hai’s net income for the third quarter rose 1.6 percent to NT$30.8 billion ($1 billion), beating analyst estimates, according to a Nov. 13 filing by the company to the Taiwan Stock Exchange.

Gou is part of a business delegation to the U.S. led by former Taiwan Vice President Vincent Siew. In addition to Gou, members of the delegation visiting New York, Washington and San Francisco this week include Douglas Hsu, chairman of Far Eastern Group -- which has holdings in industries including energy, retail and construction -- and Susan Wang, vice chairman of chemical manufacturer Formosa Plastics (1301) Group.

To contact the reporters on this story: Brian Wingfield in Washington at bwingfield3@bloomberg.net; Romy Varghese in Philadelphia at rvarghese8@bloomberg.net

To contact the editor responsible for this story: Jon Morgan at jmorgan97@bloomberg.net

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