The crucial point is not who is dependent on whom, but how to better work together.

Article by Huashang Taolue, Dongmuzhu

In the first half of 2024, Henan, which had long been the top province in foreign trade exports in central China, experienced a negative export growth rate of -19.1%, ranking third from the bottom nationwide. The main reason was the fluctuation in Foxconn's production capacity, specifically a significant year-on-year decline of 49.1% in mobile phone exports.

Yet, at a crucial moment, Foxconn "returned." In July, Foxconn signed a strategic cooperation agreement with Henan, announcing an investment of 1 billion yuan to build a new headquarters and seven centers in Zhengzhou. Henan leaders even directly stated:

"We hope Foxconn will strengthen its confidence in investing in Henan."

[iPhone Arrives]

In 2010, Guangdong began its strategy of "replacing the old with the new," that is, promoting the transfer of labor-intensive industries to inland areas to develop high-tech, high value-added industries instead.

The Shenzhen Municipal Government stated at the annual sessions of the National People's Congress and the Chinese People's Political Consultative Conference that Shenzhen faced unsustainable issues related to "land, energy, environment, and population," making it urgent to promote a new round of industrial upgrading.

The intensifying labor shortage and rising labor costs at that time also urged labor-intensive enterprises to reconsider their production capacity layouts. From March to June, a series of employee suicides brought Foxconn into the spotlight. Shortly thereafter, Foxconn reached a consensus with Shenzhen, leaving behind its research and development center and two high-tech business groups, while relocating other industries inland.

Upon hearing the news, inland provinces such as Henan, Hebei, Tianjin, Shandong, and others scrambled to compete for Foxconn's relocation.

For inland cities, the introduction of Foxconn could not only address employment, generate tax revenue, and boost foreign trade but also potentially drive the development of local technology industries, representing a significant opportunity to change the local industrial and economic landscape.

According to a security guard at Foxconn's Shenzhen campus at that time, provincial and municipal leaders from various regions practically besieged Foxconn's doors. Without a referral, even municipal leaders couldn't enter Foxconn's investment planning department, and many places sent their top leaders to attract investment but couldn't even secure a negotiation opportunity.

Henan's attempt to introduce Foxconn began in 2007, when the Zhengzhou Municipal Government established the "Foxconn Technology Group Zhengzhou Investment Project Coordination and Promotion Leading Group," with the mayor personally serving as the group leader, multiple deputy mayors as deputy group leaders, and team members comprising responsible persons from various relevant departments. However, progress was minimal, as one leader from the Provincial Department of Commerce put it:

"At that time, Foxconn had little interest in Zhengzhou."

Over the years, although the list of leaders responsible for investment promotion changed, Henan's efforts towards Foxconn remained consistent. When Foxconn began to feel pressure regarding its production capacity layout, a turning point arrived in March 2010.

Foxconn sent an advance team to Zhengzhou for a week-long inspection. Although they didn't mention whether they would invest, they asked many questions related to the IT industry and human resources.

An official involved in the reception recalled:

"At that time, Foxconn knew what they wanted to do, but we didn't."

Following this inspection, Henan responded quickly, immediately escalating the level of engagement, with the secretary and governor taking direct responsibility. After four rounds of negotiations, Henan offered Foxconn attractive preferential policies in terms of land and taxation, including planning a massive 10 square kilometers of production land, exempting corporate and value-added taxes for the first five years after production commences, halving taxes for the next five years, and applying for the establishment of a national comprehensive bonded zone.

On June 20, Terry Gou finally visited Zhengzhou in person, accompanied by the governor to inspect the Zhengzhou New Area CBD. During the dinner banquet that day, both parties confirmed their intention to cooperate.

Subsequently, the vice governor in charge of investment promotion in Henan led a delegation of dozens of people to Shenzhen to finalize the details. The deputy director of the Zhengzhou Export Processing Zone Management Committee said, "During that period, we lived in Longhua, and Foxconn was our only work."

On June 30, the Zhengzhou Municipal Government and Foxconn signed a preliminary agreement, stipulating cooperation in areas such as electronic information industry, optoelectronics industry, and sales network construction.

As soon as Foxconn's first investment in Henan was finalized, to meet the production schedule, more than 100 people from the Zhengzhou Export Processing Zone Management Committee, from leaders to employees, slept on office sofas for a month. Two thousand workers worked in three shifts around the clock to complete the renovation of seven standard factory buildings totaling 62,500 square meters and the installation of electrical equipment and other infrastructure work.

During construction, when it was difficult to purchase special-sized cables and air compressors needed for Foxconn's factories, city government officials went to ongoing subway construction projects in the city to "borrow" them, saying, "We had to let other construction sites wait; what else could we do? This is the 'governor's project.'"

From signing the agreement to the first component landing, Zhengzhou took only one month, surprising Foxconn with the "Zhengzhou Speed." Apple's then-Chief Operating Officer Jeff Williams also gave his thumbs up, stating, "Zhengzhou is very focused."

Foxconn, in turn, brought surprises to Henan: it would produce the world's most valuable technology product here, something many Henan officials and citizens believed could truly develop the central region. The name of this product was:

iPhone.

[Zhengzhou's "Apple City"]

In October 2010, with Henan's urgent application, the State Council approved the establishment of the Xinzheng Comprehensive Bonded Zone in Zhengzhou, the first comprehensive bonded zone in the six central provinces.

The Comprehensive Bonded Zone is the highest level of openness, with the most preferential policies, most comprehensive functions, and the simplest procedures among special customs supervision areas, equivalent to an "inland free trade zone," greatly simplifying import and export procedures for enterprises.

The Xinzheng Comprehensive Bonded Zone can be considered tailor-made for Foxconn, with Foxconn's Zhengzhou headquarters and production base located here, occupying an area equivalent to four times that of Foxconn's Shenzhen Longhua campus. Due to iPhone production, this area is also known as the "Apple City."

In November 2011, at the closing ceremony of the Zhengzhou Xinzheng Comprehensive Bonded Zone, Terry Gou remarked:

"Last year, when I first came in June, this place was just a jujube orchard and sandy land. Now, more than 1.3 million square meters of factory buildings have been built. Henan's speed and efficiency are astonishing. Henan people, number one!"

With policies, factories, and personnel in place, Foxconn focused on iPhone production and launched the "Golden Craft Central Plains" plan, using Zhengzhou, Luoyang, and Jincheng in Shanxi Province as bases to form a Central Plains Golden Triangle manufacturing hub:

Zhengzhou is responsible for the assembly and manufacturing of iPhone products, Luoyang for the production of glass panels, Jincheng for core components and other production bases, and Taiyuan for the production of iPhone back covers and other materials.

Foxconn's arrival brought many changes to Henan.

During peak hiring seasons, government departments at all levels in Henan, from townships, counties, cities, to the province, had recruitment targets for Foxconn. Staff from local Human Resources and Social Security bureaus served as Foxconn's recruitment contacts.

Streets were filled with "Foxconn Job Application Consultation Points," and many Henan workers no longer had to travel far to the Pearl River Delta for work but instead joined Foxconn's modern assembly lines in Zhengzhou, rapidly turning it into the world's largest smartphone manufacturing base.

In October 2014, Apple CEO Tim Cook visited the Xinzheng Bonded Zone, accompanied by Terry Gou, to enter the iPhone 6 assembly workshop. This was his second visit to Zhengzhou, aimed at overseeing iPhone 6 production.

At that time, Zhengzhou had 94 production lines for iPhone 6 and iPhone 5s, with a daily production capacity of 500,000 units.

Cook donned a white work suit and shoe covers, experienced the boxing process at the workstation, and even sat next to a female worker for a full five-minute conversation.

The iPhone 6 was the first large-screen phone introduced by Cook after taking over as Apple's CEO. With global sales of 224 million units, it catapulted him to stardom and also pushed Henan's foreign trade import and export scale to an all-time high.

The process was quite dramatic.

In the first eight months of 2014, Henan's monthly foreign trade import and export hovered below 30 billion yuan. With the sale of iPhone 6, its monthly import and export surpassed 50 billion yuan from September to December, ultimately setting a new record with an annual total of 399.44 billion yuan in import and export value.

The photo of Cook and the smiling Foxconn female worker also spread worldwide, refreshing Zhengzhou's image.

From 2010 to 2016, Zhengzhou Foxconn achieved an annual growth rate of approximately 30 million mobile phones produced, cumulatively producing over 460 million iPhones.

In 2015, one out of every seven mobile phones globally was produced in Zhengzhou.

Throughout the "13th Five-Year Plan" period, Zhengzhou Foxconn drove over 200 related industrial chain enterprises to locate in the Airport Economic Zone, where the "Apple City" is located, with a total investment of 300 billion yuan.

Since its establishment in Zhengzhou, Foxconn's Zhengzhou Science and Technology Park has achieved a "twelve-year consecutive growth," annually driving US$30 billion in exports and accounting for approximately 60% of Henan's total import and export value and 80% of Zhengzhou's.

Zhengzhou has thus become the world's unique "Apple City."

[Joint Transformation]

In recent years, influenced by factors such as Sino-US trade frictions and the pandemic, Apple has increased its production capacity layout in India and Southeast Asia. As its primary contract manufacturer, Foxconn's production capacity adjustment in mainland China has become a topic of great interest.

Two viewpoints have emerged: One believes that Henan is more dependent on Foxconn, and if Foxconn "sneezes," Henan's economy will "catch a cold." The other viewpoint is that Foxconn is more dependent on Henan, as the yield rate of iPhones produced in India is low, and without the hundreds of thousands of industrial workers in Zhengzhou, iPhone supply cannot be guaranteed.

Undeniably, the decentralization of Apple's supply chain and capacity transfer will affect Zhengzhou Foxconn, further impacting Henan's electronic information industry, foreign trade output value, and dragging down Henan's economic development. Moreover, Apple and Foxconn indeed require the production capacity support of Zhengzhou Foxconn to ensure the continued success of the iPhone.

However, objectively speaking, neither Foxconn nor Henan, nor even more collaborators, would be unable to survive without each other.

Henan is not solely dependent on Foxconn. In 2023, Foxconn's annual revenue was 476.34 billion yuan, while Henan's provincial GDP was 5.9 trillion yuan, negating the notion that Henan is inseparable from Foxconn. As the world's 27th largest company, Hon Hai Precision Industry's business extends beyond Henan, and even iPhones are not exclusively produced in Zhengzhou worldwide.

Therefore, the true development mindset should not be about who is dependent on whom but rather how to better work together, mutually need and cooperate, in other words, how to better advance hand in hand.

In fact, behind the so-called dependence, Henan and Foxconn have always been striving harder to move towards each other bidirectionally.

On the one hand, even if Apple achieves its goal of transferring 25% of iPhone production capacity to India, Zhengzhou Foxconn will remain the most critical iPhone production base.

Taking the highly anticipated iPhone 16 as an example, the product is currently in its preparation cycle, and Zhengzhou Foxconn has also entered its production peak season. Workers' hourly wages have increased from 21 yuan to 26 yuan, with bonuses exceeding 8,000 yuan for those who work in the manufacturing workshop for three consecutive months. According to Caixin, 50,000 new employees joined in July alone.

On the other hand, Henan and Foxconn are collaborating on more initiatives.

Using the iPhone as an entry point, the Zhengzhou Airport Economic Zone, where the "Apple City" is located, has seized industrial opportunities and explored a development path for the transformation of the electronic information industry, taking new-type displays and smart terminals as breakthroughs.

Under this approach, the Zhengzhou Airport Economic Zone is upgrading from labor-intensive to technology-intensive industries, expanding from a single mobile phone manufacturing base to related industries such as backend modules, semiconductors, and integrated circuits. Henan is constructing a comprehensive industrial ecosystem encompassing "chips, screens, networks, devices, and appliances."

Liu Yangwei, the current chairman of Hon Hai Precision Industry, stated, "Digital transformation is a crucial stage for Hon Hai's transition from 'labor-intensive' to 'brainpower-intensive.'" Currently, this transformation corresponds to investments and developments in Zhengzhou and Henan.

Since 2023, Foxconn has been continuously active in Henan, inaugurating a new business headquarters in Zhengzhou and establishing multiple new companies, including Henan Foxconn New Energy Automobile Industry Development Company.

Liu Yangwei visited Henan three times, promising to recreate a "new Foxconn" in Henan. He stated at the inauguration ceremony of Foxconn's new business headquarters:

"We will continue to deepen our presence in Henan and accelerate the implementation of our transformation and development strategies, including electric vehicles and semiconductors."

According to incomplete statistics, since its establishment, Foxconn has cumulatively trained over 3.5 million skilled industrial workers. It has not only effectively alleviated the employment difficulties in Henan, a major labor province, but also helped transform many migrant workers into industrial workers, representing a significant and irreplaceable asset for Zhengzhou and Henan.

Zhengzhou and Foxconn may be just a microcosm. Amid China's industrial transformation and upgrading, as well as changes in the global supply chain and market landscape, both China and enterprises investing in China will face new changes and even separations and reunions. However, regardless of the situation:

The crux is not who is dependent on whom but rather how to better work together, respond to challenges hand in hand, and create a brighter future together.

[Reference Materials]

[1] "How Henan Secured Foxconn" - Southern Weekend

[2] "Foxconn Signs Cooperation Agreement with Henan Province to Build a New Business Headquarters" - Securities Times

[3] "Foxconn's 14-Year Deep Roots in Henan: A 'Bidirectional Pursuit' Between a Major Province and a Major Enterprise" - Henan Daily