Hon Hai Precision Industry Co. Ltd., better known as Foxconn, is reported to be in talks with Saudi Arabia about jointly building a multipurpose factory.

People familiar with the matter told The Wall Street Journal that the factory would be valued at about $9 billion and could make microchips, electronic vehicle components and other electronics such as displays.

Foxconn is the world’s biggest electronics manufacturing company. The company counts among its clients Apple Inc. along with Sony Corp., BlackBerry Ltd., Amazon.com Inc. and various others. Based in Taiwan, the company has operations in nearly a dozen countries, with mainland China being where its biggest plants are located, such as its Chengdu factory (pictured), which manufactures iPads for Apple.

The Journal reports that the proposed Saudi plant would be a dual-line foundry for surface-mount technology and water fabrication in Neon, a tech-focused city the kingdom is developing in the desert. The Saudi government is said to be currently conducting due diligence and benchmarking the deal against others that Foxconn has made for similar projects globally.

The Saudis are asking Foxconn to guarantee that it would direct at least two-thirds of the plant’s product into Foxconn’s existing supply chain to ensure there are buyers for the products made, making sure the plant is profitable. In return, Foxconn is said to be asking for large incentives on financing, tax holidays, and power and water subsidies.

Foxconn is also said to be talking to the United Arab Emirates about potentially building the project there.

The move to potentially set up a plant in Saudi Arabia comes as Foxconn attempts to diversify its manufacturing sites amid tensions between China and the U.S. As noted in 2020, most of the company’s manufacturing operations are based in China with the risk that tariffs could impede their competitive advantage. Foxconn said at the time that it was building two supply chains, one for China and one for the U.S.

“The world factory no longer exists,” Foxconn Chairman Liu Young-way said at the time. “No matter if it’s India, Southeast Asia or the Americas, there will be a manufacturing ecosystem in each.” The term “world factory” is one that has been previously applied to mainland China.

Ongoing issues with the COVID-19 pandemic may also be a consideration by Foxconn to expand in manufacturing base out of the Middle Kingdom. Foxconn was first forced to halt production at the beginning of the pandemic and two years later, it is still experiencing issues in China. Only today, Foxconn announced that it had suspended operations in Shenzhen amidst yet another local lockdown.

Although most of the rest of the world has moved on from a policy of COVID lockdowns, the Chinese Communist Party is still pursuing a zero-COVID policy, with large lockdowns to prevent the spread of the disease.

Photo: Duncan Riley