Terry Gou, founder of Foxconn.
Foxconn, the world’s largest contract assembler of consumer electronics, is in talks with Saudi officials about the prospect of opening a $9 billion factory in the Middle Eastern nation that wants to diversify its economy away from oil, the Wall Street Journal reported this week.
The factory will make semiconductor chips, electric vehicle components and other electronics in Neom, a city near the Red Sea coast where Saudi officials are developing into a tech hub, according to the Journal.
The Taiwanese assembler of iPhones, founded by Taiwanese billionaire Terry Gou, did not answer questions about the Saudi Arabia plant. Foxconn operates 12 China plants across nine cities. Other operations are in Europe, Indonesia, Thailand and Vietnam.
“One of the unique advantages for Foxconn of having a factory in Saudi Arabia is that it can be closer to the Middle East market to tap local demand while diluting the geopolitical risks by avoiding tariff barriers to make prices more competitive,” says Tu Chia-wei, an industry analyst with the Market Intelligence & Consulting Institute in Taipei.
China and the United States have been embroiled in a trade dispute since 2018. Foxconn has been trying to spread its operations beyond China in part to avoid trade dispute fallout. Foxconn is set to invest NT$257 billion (about $9 billion) in building plants in Saudi Arabia, says Tu.
Saudi officials probably met with Foxconn because they plan to diversify the energy-intensive economy away from oil, said Yang Wang, a senior analyst at Counterpoint. The government intends to reshape Saudi Arabia into an industrial powerhouse in eight years, per its Vision 2030 plan. “One of the ways to realize the tech goals of Saudi Vision 2030 will be to embed the country in the global tech supply chain,” he says.
Saudi Arabia’s sovereign public investment fund, Public Investment Fund, will probably bankroll projects that are part of Vision 2030, Wang says. He notes that the fund created a $6.4 billion investment proposal in February for future technology and last year invested $1 billion in Lucid Motors, an electric car maker that plans to open its first manufacturing plant outside the U.S. in Saudi Arabia.
The company “could be doing a bit of subsidy shopping here and trying to get the best financial incentives” from Saudi Arabia or the nearby United Arab Emirates, Wang adds.
Source: https://www.forbes.com/sites/ralphjennings/2022/03/17/why-iphone-assembler-foxconn-might-build-a-9-billion-factory-in-saudi-arabia/