subscribe: Posts | Comments | Email

Additional News Related to Foxconn’s Manufacturing Investment in the United States

0 comments

In late January, we alerted Supply Chain Matters blog readers to published reports indicating that global contract manufacturer Foxconn, (Hon Hai Precision Corp.), the new parent of Sharp Corp. was evaluating a potential $7 billion investment in a new LCD manufacturing facility to be in the United States. Our takeaway at the time was that if this investment did indeed occur, it would represent a significant milestone for the high-tech and consumer electronics supply chains. We believed that the plant investment would further have a linkage to Apple’s future production needs.  Foxconn 300x201 Additional News Related to Foxconns Manufacturing Investment in the United States

Since that time, there have been various reports indicating on and off again negotiations with individual U.S. states. In late June, we updated readers to an Associated Press published report citing an informed source, indicating that Foxconn’s proposed U.S. factory might have a Wisconsin address and that active negotiations with state officials was occurring. The report indicated that the state of Michigan was also a possibility.

This week, The Wall Street Journal, again citing informed sources, reports that Foxconn’s decision on a location is imminent and could be announced as early as this week. The location for the major investment is once again noted to be the State of Wisconsin, the home state of U.S. Speaker of the House of Representatives, Paul Ryan. Further reported by the WSJ was that in addition to Wisconsin, Foxconn is evaluating the Detroit Michigan area for a possible additional plant investment although it is unclear as to what specifically would be manufactured at the Detroit facility. Once again, the WSJ cautions that a final decision has not been made and that there could be last-minute changes. Indeed, previous reports had such an announcement timed to the prior visit of China’s Premier to meet with President Trump.

In addition to the reports concerning Foxconn, there has been other separate news and rumors originating from various Asian news sources indicating that Apple is actively considering investing in its own OLED screen technology production to limit the company’s current dependency on major LCD suppliers Samsung Electronics and LG Display.  Samsung is reported to be the current sole supplier of new OLED technology to be new iPhone 8 model currently in the new product introduction phase, and rumored for release later this year. With Foxconn being Apple’s de-facto prime contract manufacturer, this other news may imply that Foxconn’s potential U.S. investment would be to establish in-house supply of OLED screens for future iPhone models as well as to other U.S. based display component needs. This establishes further credence to Foxconn Chairman Terry Gau’s recent statement to shareholders:

This time we go to America, it’s not just to build a factory, but to move our entire supply chain there.”

Again, all of this is speculation but increasingly plausible at this point.

Indeed, such developments represent a very big deal for high-tech and consumer electronics supply chains, and specifically Apple’s supply chain, along with that of U.S. Based automotive brand owners that increasingly feature more high-tech electronics, autonomous driving features and visual displays in future automobile models. The pieces of such strategies seem to be falling into place.

We will all know more soon.

Bob Ferrari

© Copyright 2017. The Ferrari Consulting and Research Group and the Supply Chain Matters® blog. All rights reserved.

 


The Supply Chain Matters Blog Returns

0 comments

We want to alert our readers that Supply Chain Matters has returned from two weeks of summer holiday.  Supply Chain Matters Blog 350 100 J The Supply Chain Matters Blog Returns

Industry supply chains take little pause in ongoing developments and events, and that has certainly been the case during our brief hiatus. Catching up on events, we noted:

Costco Shipping’s Controlling Interest in OOCL

Another consolidation effort in ocean container shipping with the July 8th announcement by China’s Cosco Shipping Holdings intent to acquire a reported $6.3 billion controlling interest in Hong-Kong based Orient Overseas International (OOCL). The deal, if consummated and approved by global maritime regulators, would result in Cosco being recognized as the third largest container shipping firm in terms of capacity, behind industry leader Maersk and Mediterranean Shipping Co. (MSC). Also with the approval of Costco’s move, the top six ocean container shipping lines would in-essence, control three-quarters of all ocean transportation. That has implications for global shippers and industry supply chains.

More Apple Supply Chain Rumors

Continued rumors abounding as to what is no-doubt, the globe’s most visible supply chain. Various reports indicate that Apple’s planned introduction and shipment of its new line of smartphones, including the hyped 10th Anniversary edition, is reportedly behind schedule due to various production start-up or other delays. Such rumors and speculation are nothing new, and some argue are orchestrated to create a frenzy of demand among Apple’s loyal customer base eager to get hands on the latest model. As to what really is occurring is a matter of time and continual observation, especially considering the financial stakes among Apple’s supplier ecosystem.

Sears Teams-up with Amazon on Kitchen Appliance Offerings

The retail industry is buzzing over the announcement of an agreement among Sears Holdings and Amazon indicating that Sears will sell its Kenmore line of refrigerators and kitchen appliances on the Fulfilled by Amazon online fulfillment platform. The move thrusts Amazon much deeper into hard-goods retailing and distribution, a segment yet to be penetrated. From our lens, the more interesting twist to this development is a large retailer, on literal financial life-support, taking a gamble with one of the most-savvy online retailers. There may well be more to this new partnership in the coming months.

On the similar theme of Amazon, business news network CNBC reports that to boost its online catalog of offered merchandise, the online retailer has introduced a new program offering retailers the opportunity to have Amazon buy inventory at full price from third-party merchants while offering to sell such goods on the Fulfilled by Amazon portal. According to this report, in some cases, Amazon has approached third-party merchants after specific end-item manufacturers have specific contract clauses prohibiting the distribution of that manufacturer’s products on the Amazon platform.  This has the potential to place certain merchants in contract violation with a specific manufacturer or goods producer.

Wal-Mart Gears-Up for OTIF Hipping Enforcement

Beginning in August, Wal-Mart will operationalize its “On-Time, In-Full” program, holding suppliers accountable for shipments to be delivered exactly to schedule. The program applies to full-truckload shipments of fast-moving items to the global retailer’s vast network of store distribution and customer fulfillment centers. According to Wal-Mart, goods must be delivered as ordered 100 percent in full, and must arrive on the firm delivery date 75 percent of the time. Items that are late or missing during a one-month period will incur a fine of 3 percent of the goods value. Thus, suppliers will be held to stricter delivery scheduling and stand to be penalized for nay shipments arriving later or even earlier that the planned delivery date. According to a report by Bloomberg, OTIF is one of the hottest discussion topics in retail as suppliers prepare for supporting this new program. Wal-Mart is reportedly playing hardball as well, indicating that if a supplier is determined to be at-fault for not delivering goods on the specified day, the delivery fine will be enforced and is according to the retailer, non-negotiable. From our lens, this will provide rather interesting dynamics among suppliers and their third-party logistics providers contracted to deliver to Wall-Mart.  Who pares the burden of the fine when the 3PL is deemed at-fault?

 

Another Chipotle Mexican Grill Illness Incident

There was another reported norovirus incident involving a Chipotle Mexican Grill restaurant, this one being an outlet located in that state of Virginia, where upwards of 100 patrons were sickened. Preliminary indications are that the contamination did not originate from the food supply chain, but none the less, the incident casts yet another shadow of scrutiny for the restaurant chain’s food safety practices. Wall Street is now awakening to the realization that more consumers will shun the Chipotle brand and that the chain’s aggressive efforts to convince consumers that its food safety mitigation efforts had been addressed.

 

June Cyberattack Impacts FedEx

Weeks after the late June Petya cyberattack that impacted numerous businesses across Europe, FedEx’s TNT Express unit reportedly is still experiencing the aftereffects. Some recent securities filing by the company indicates that TNT shipping hubs and facilities remain operational but are being operated with manual processes. FedEx indicates it cannot estimate at this time when full computerized operations will be restored and that the cyberattack will likely have a financial impact on its operations for the quarter. Further disclosed was that FedEx does not have business insurance to compensate for the effects of a cyberattack.

 

Indeed, the supply chain universe continues to overcome business challenges and Supply Chain Matters will continue to provide our readers the essential insights as to what to expect and how to prepare.

Stay tuned for continued multi-industry coverage and insights.

 

Bob Ferrari

© Copyright 2017. The Ferrari Consulting and Research Group and the Supply Chain Matters® blog. All rights reserved.

 


More Definitive News on Pending Foxconn Investment in the United States

0 comments

In late January, we alerted our Supply Chain Matters blog readers of a published report from The Wall Street Journal indicating that global contract manufacturer Foxconn, (Hon Hai Precision Corp.) new parent of Sharp Corp. was evaluating a $7 billion in new LCD manufacturing facility in the United States. Our takeaway from this report was that if this investment did indeed occur, it would represent a significant milestone for the high-tech and consumer electronics supply chains. We believed that the plant investment would further have a linkage to Apple’s production needs.  Foxconn 300x201 More Definitive News on Pending Foxconn Investment in the United States

Since that time, there have been various reports indicating on and off again negotiations with individual U.S. states. Last week, the Associated Press, citing an informed source, indicated that Foxconn’s proposed U.S. factory might have a Wisconsin address and that active negotiations with state officials was occurring. The report indicated that the state of Michigan was also a possibility.

Today, the investment advisory site Seeking Alpha, Reuters and other news outlets are now indicating that a final decision is expected in July.

According to Seeking Alpha, the total investment is $10 billion across the United States, beginning with a $7 billion LCD factory. The July decision will likely determine whether Wisconsin or Michigan are the likely site for the factory.

Foxconn CEO Terry Gou has indicated that five other states are under consideration for Foxconn investments including Ohio, Pennsylvania, Illinois, Indiana, and Texas.

Reuters reports that Gau indicated to shareholders:

This time we go to America, it’s not just to build a factory, but to move our entire supply chain there.

Prior reports were indicating that Gau was playing hardball in his ongoing negotiations with individual states, in-essence threatening to continue the process until favorable terms to Foxconn were evident. In the latest Reuters report, Cau is now quoted as indicating he has been favorably impressed, beyond imagination, with the sincerity and confidence by individual state governors to attract investment.

If readers are noting a subtle political tone to these events, you are not alone. Many of the states noted under consideration, including the two finalists voted favorably for President Trump is the last election. The final announcement, when made, will resonate well with “Make America Great Again” voters.

Politics aside, make no mistake that this is a very big deal for high-tech and consumer electronics supply chains, specifically Apple’s supply chain, along with that of U.S. Based automotive brand owners that increasingly feature more high-tech electronics, autonomous driving features and visual displays in future automobile models.

A very big deal indeed.

 

Bob Ferrari

© Copyright 2017. The Ferrari Consulting and Research Group and the Supply Chain Matters® blog. All rights reserved.


Can Automotive Industry Supply Chain Strategy Undergo Disruption- Perhaps Yes?

Comments Off on Can Automotive Industry Supply Chain Strategy Undergo Disruption- Perhaps Yes?

To state the obvious, this has been a week of significant industry developments mostly all pointing to implications for industry supply chain structural change. Having just published our initial commentary on the thunderbolt developments in traditional grocery retailing, we now add more evidence of building disruption, in this case, for automotive supply chains.

Tim Cook has finally publicly acknowledged that Apple has a formal development effort underway focused on Autonomous Driving Systems. In a published interview on Bloomberg Television, Cook indicated: “It’s a core technology that we view as very important.He likened the effort to “the mother of all AI projects,” saying it’s “probably one of the most difficult AI projects to work on.” Tesla Mod3 Sized 450 Can Automotive Industry Supply Chain Strategy Undergo Disruption  Perhaps Yes?

As Supply Chain Matters and other business focused social media outlets have all previously noted months ago, Apple’s efforts in either autonomous driving or electric vehicle manufacturing, under the umbrella of Project Titan, were an open secret. While the effort itself has had its share of fits, starts and scope changes, Cook’s public acknowledgement is an obvious indication of a purposeful and meaningful business initiative that could soon lead to further announcements. With all things related to Apple, timing of announcements is always a prelude to an evolving marketing or pre-planned corporate communications plan to boost brand and investor interest.

In its summary of the interview, Bloomberg notes that Apple has had upwards of a half-dozen vehicles testing autonomous technology on public roads in and around the San Francisco Bay area for at least a year, citing a source familiar with Project Titan. Of course, Apple itself declined to comment on how long the company has been conducting road tests.

Always having a focus on industry supply chain implications, this Editor searched for other opinion and commentary, and found just that.  In fact, we found an opinion commentary that provides powerful arguments for a pending disruption of automotive industry supply chain, and in notions of automotive and electronics contract manufacturing.

An opinion commentary penned by EnerTuition, and hosted on the Seeking Alpha financial investor platform addressed the question: Can Apple Disrupt Automotive Manufacturing?  Without fringing on content rights, the arguments presented for the affirmative are by our view, powerful and dead-on.

The content makes a strong case that there is little doubt that Apple will enter autonomous car manufacturing, with the primary reason being that Apple never considers itself as just an IP or software components company. There is always the full branding strategy of products and related services.

Further challenged is the conventional industry thinking that “the auto industry cannot be disrupted” because of the capital-intensive nature of this industry. While the statement has meaning for traditional automotive manufacturing that is hardware, metal and sheet metal intensive, the counter argument presented is that autonomous electric vehicles provide a far different product value supply chain profile. That includes batteries as the highest cost-of-goods sold (CAGS) component, followed by vehicle sensors and software systems. The assumption presented, although somewhat future focused by our view, is that there will be no need for human factors such as steering wheel placements and instruments, which opens consideration for a singular global product design and manufacturing process.

The most interesting and profound opportunity for disruption is within the core area of manufacturing.

The argument made is that with most of the value-added of electric powered cars consisting of electronics vs. sheet-metal, and with the change coming so rapidly, manufacturers or industry disruptors will have little choice but to adopt a contract manufacturing strategy. With such a strategy, EnerTuition argues that the supply chain dominants will become emerging automotive component sub-systems and electronics providers, augmented with existing high-tech electronics contract manufacturers. Names such as Foxconn, Flextronics and Jabil are argued to grow more share of contract automotive manufacturing.

The above, ladies and gents, is a rather strong argument to support how Apple can indeed move directly into automotive manufacturing, because of its intimate knowledge and proven capabilities to understand the tenets of supply chain strategy and utilization of contract manufacturing. And, if you tend to dismiss any parts of the above arguments, consider that Apple, with its obscene cash balance, could acquire an electric automobile manufacturer itself. Guess which one- it starts with a “T”.

The reason we are highlighting this Seeking Alpha commentary for our readers is because this Editor and independent supply chain management industry analyst has been observing new and emerging positioning and capability among contract manufacturers and the industry that points toward such technology-driven changes.  Recall that just recently, Ford Motor elected to undergo a CEO change because of the stated need to move faster in technology innovation and in development efforts in autonomous vehicles.

There is ample evidence that disruption is indeed on the horizon soon, and traditional auto manufacturers and their key suppliers may be the deer in headlights if they do not move fast enough with an integrated product development and supply chain support strategy

Bob Ferrari

© Copyright 2017. The Ferrari Consulting and Research Group and the Supply Chain Matters® blog. All rights reserved.


For Smartphones- Integrated Product Design, Supply Chain and Manufacturing Capabilities Matter

Comments Off on For Smartphones- Integrated Product Design, Supply Chain and Manufacturing Capabilities Matter

A growing tenet in what is today’s broad supply chain management capability umbrella is the ability to be able to integrate product and manufacturing process design with global-wide production capabilities, faster and cheaper than existing competitors. The notions of responding to local customer needs and desires are now often manifested by co-locating or virtually connecting product design with supply chain process capabilities and continue to become important differentiators for industry supply chains, and for industry disruptors.

These notions are now playing out in the global smartphone market with recent revelations that China based industry disruptors are gaining more global market-share by a strategy of a keen focus on local and regional consumer needs, and on a keen dependency on an integrated and demonstrated agile manufacturing region in China.

Information technology and consumer electronics quantitative market analysis firm IDC recently disclosed that a collection of Chinese smartphone manufacturers have now secured more than 40 percent of global smartphone market-share in the first quarter of this year, nearly double the number of five years earlier. That is a remarkable achievement.  A recent published report by The Wall Street Journal (Paid subscription required) brings forward two significant reasons for this achievement.

The first is the willingness of brand providers such as Transsion Holdings, maker of branded Tecno, itel, and Infinix phones, along with BBK Electronics, maker of branded Oppo and Vivo smartphones, to engineer product features of specific interest within local and regional markets. Localized features include dual SIM card slots, differing camera and imaging features that cater to local norms or demographics.

The second noted reason for success was a common dependence on China’s coastal Pearl River Delta high-tech manufacturing region, the original home to many electronics focused contract manufacturers, for deep supply chain process and manufacturing capabilities. More than 20 Chinese smartphone producers now have manufacturing and engineering dependence within this region.

The WSJ report declares: “The fight (among smartphone producers) is all about staying competitive in pricing and features, and Shenzhen is the battleground. Once known as a little more than a hub of contract manufacturing for Western technology giants, the region has given birth to an array of domestic upstarts by marrying low-cost production and high-tech engineering.

In other words, the region has now developed a collection of integrated product value-chain capabilities that are able to respond to market needs in a far quicker manner, and a more competitive product

Interesting enough, as our Supply Chain Matters readers are often aware, Apple has had a similar reliance on the Pearl River region, specifically Foxconn and other contract manufacturers for manufacturing engineering and production capability as well as new product time-to-market needs. Apple elected early on to maintain product design engineering in Cupertino, and to engineer its smartphones for general global user needs. The same could be stated for Samsung, which relies on China and Vietnam as manufacturing centers, but maintains centralized engineering. Both producers have since added local and regional engineering centers to identify local product functionality needs.

Once again, the name chosen as blog nameplate was purposeful, that indeed, supply chain capabilities do matter for successful business outcomes, and in today’s global markets, supply chain represents a far broader collection of functions and capabilities spanning the product value-chain.

Bob Ferrari

© Copyright 2017. The Ferrari Consulting and Research Group and the Supply Chain Matters® blog. All rights reserved.

 


« Previous Entries Next Entries »