The next China?

As has been well-documented both in Cargo Facts and in many other publications, manufacturing costs in China have risen rapidly over the last few years, to the point that many companies have relocated some or all of their outsourced manufacturing to other countries, or are actively considering doing so.

One such company is Taiwan-based Foxconn, the world’s largest manufacturer of electronic components, which is planning to invest between US$5 billion and $10 billion to build a massive manufacturing facility near Jakarta, Indonesia, where wages are only about one-third of Chinese wages. The factory site will be in the Modern Cikande Industrial Estate, adjacent to Jakarta’s Halim Perdanakusuma International Airport (HLP), and while initial production will be largely targeted at the local market, export production is expected to ramp up in the second phase of the project (slated to begin in mid-2013).

This is relevant to the airfreight industry on two fronts. First, simply because it is Foxconn. The company’s recent move into Chongqing, for example, has helped put that inland Chinese city on the air freight map in a big way, and the same has happened in other cites such as Wuhan. Foxconn is the largest private-sector employer in China and also the country’s largest exporter, and much of what it exports moves by air. (For the record, it also has factories in Brazil, Hungary, Slovakia, Czech Republic, India, Japan, Malaysia and Mexico).

The second issue concerns the shifting balance in the movment of freight between the main decks of dedicated freighters and the bellies of widebody passenger aircraft. The increasing ability of some airlines to connect the world in one stop with their passenger fleets has made life more difficult for operators of freighter aircraft, but when an airfreight-dependent industry like electronics manufacturing suddenly expands its presence in a new location, freighter aircraft are indispensable. So in a couple of years you can expect to see 747-400Fs and -8Fs, 777Fs, and A330-200Fs appearing at HLP in substantial numbers.

Today’s blog is expanded from the current issue of Cargo Facts Update. Those of you who do not already subscribe to the the monthly printed Cargo Facts newsletter, and its companion the weekly emailed Cargo Facts Update, can click here for more information.