Foxconn Will Build Factory in Indonesia, What’s In It for Us?

Several media have reported that Foxconn will build a factory in Indonesia. As reported by Antara, the confirmation is disclosed by the Minister of Industries, MS Hidayat who states that the agreement has been signed when the Minister of Trade, Gita Wirjawan visited Taiwan some time ago.

Foxconn will build a factory worth USD1 billion of investment and expected to be able to employ up to 1 million work forces. Although Foxconn is hoping to build a factory in Central Java or East Java region, the government is pushing the location to outside Java by offering some tax incentives. The feasibility study for this factory can take a year.

Foxconn is known as one of the biggest electronic manufacturing companies in the world. Under the official label Hon Hai Precision Industry, Foxconn’s headquarter is in Taiwan and has many factories in some continents. Foxconn’s biggest (and many) factory is located in China. Foxconn owns 13 factories in China, where one factory employs around 100 thousand to 500 thousand workers. Overall number of Foxconn’s workers in China reaches 1.2 million people. Foxconn is also reported to have several factories in Malaysia even though the scale is not too massive.

Foxconn is a manufacturing contractor for almost every cell phone and computer. From Apple to Samsung, from Nokia to Sony, even from Dell to Acer; all of those trust the manufacturing of their devices to Foxconn. One day, we will find a device with the lable “Design in California/Finland/Korea, Assembled in Indonesia”. The establishment of factory in Indonesia is confirmed as not being the relocation of its factories in China but the need for expansion.

Back to the initial question, what is the benefit if Foxconn build its factory in Indonesia? The first is obviously foreign exchange. An investment worth USD1 million is certainly a huge amount. Such big investment can be a catalyst for another foreign investment to enter Indonesia because Indonesia will be considered as a safer place for investment (and lower risk).

The establishment of big electronic factory will also push the establishment of subcontractor to help Foxconn in finishing smaller jobs. This is a good incentive for hardware business’s stagnant movement in Indonesia after several electronic producers moved their business line to Malaysia or Vietnam.

The second benefit is related to work force. Like it or not, the main issue of work labor in Indonesia is the number of unskilled workers with low education. One million workers which will be employed certainly have varied skills, depending on the level of education and skill. The government is responsible to give massive job opportunities for the people and this is a chance for many people to earn a living. Labor-intensive industry is still a star in countries like Indonesia.

There are two options for skilled workers. First is to join Foxconn as mid level or high level employee. Second is to establish a subcontractor that can help Foxconn, as mentioned before. The ones who will be recruited are the people with strong knowledge of electronic and business. Meanwhile, I haven’t had the clue on what kind of benefit will software developer receives to be able to take advantage of Foxconn’s step.

Is the establishment of Foxconn’s factory has something to do with Apple which started to recruit Indonesian? We know that Apple is Foxconn’s biggest client, but I honestly not sure that these things relate to each other. As far as I know, Apple chose Foxconn’s factory in China as the place to assemble its products because the workers there work neatly, fast and don’t complain much.

As once reported by New York Times, there were times they could work nonstop on the weekends or dragged out of bed in the middle of the night for the sake of target fulfillment. With the work ethics of Indonesian workers, this “militant” condition will be difficult to be implemented. This method is more suited in socialist countries where the people will obey the authority/powerful people.

But who knows? Recently, Foxconn has started to assemble iPhone in Brazil. At least, the factory here has to run smoothly for 3-5 years, with no accident and riot, to attract Apple’s interest to shift its production line here. Certainly, we are expecting this to happen.

As the closing, I am hoping for the government to be able to take advantage of this situation. Other than giving a field as production location, I expect transfer of technology to happen so Indonesia is no longer an assembler but will be able to design and produce its own products. Who knows that in 15-20 years, a pure Indonesian big contractor will have world’s electronic companies as its customers.