China Moves Up the Value Chains: Foxconn's Dilemma
With a fine division of labor across different countries, the global value chains use global sourcing and combines developed countries' know-how with developing countries' low-cost labor to produce lower-priced and higher-quality products, bringing benefits to all parties joining the global value chains. This case, which is based on Foxconn, a major supplier to Apple and other global technology giants, enables students to understand that several forces are challenging and reshaping these global value chains. Foxconn, officially known as Hon Hai Precision Industry, plays an important role as an electronics manufacturer in the global supply chains. The company manufactures different parts in multiple locations to lower costs and offers good quality and competitive prices. Foxconn's main manufacturing plants are all located in China, but Foxconn is under pressure from major US customers such as Apple to move production facilities to other countries. Many factors that are reshaping the global value chains, such as the US-China trade war and COVID-19 pandemic, all have affected Foxconn's operations and forced Foxconn to adjust its strategies. This case sheds light on the risks of global value chains. It provides an opportunity for students to discuss how a company can be affected by global value chain restructuring, especially the US-China trade war and the COVID-19 pandemic, and what strategies a company might adopt to cope with global value chain restructuring.