Foxconn has postponed the building of a new mobile phone plant in Vietnam until 2011, citing difficulty in raising funds for the project as the reason for the delay.
The project was announced earlier this year, with plans to begin construction of the facility in the second quarter of 2010. We’re in the final quarter now and no work has begun on the building, leading many to question what happened to the $200 million project.
They need no longer wonder, as the Vietnamese state media has today confirmed that Foxconn, famed for a spate of suicides throughout the year and overall terrible working conditions, will not be building the plant until the first half of 2011.
The new plant is to be built in the northern provice of Vinh Phuc and it is expected to produce 89 million mobile phones a year.
Foxconn has asked the local government in Vietnam for permission to delay the construction. It said that financial difficulties arising from the global recession has hindered its intentions in Vietnam, but we wonder how a multi-billion company like Foxconn can suddenly run out of money for a project that has been on the drawing board for so long.
At the end of August Foxconn revealed its second quarter results, which were well below analyst expectations. It posted a healthy NT$16.7 billion ($521 million) profit, which was more than the NT$15 billion ($468 million) it gained in the second quarter of 2009, but it was signicantly lower than the NT$19.4 billion ($605 million) that some forecast.
It is easy to see why Foxconn is interested in the region, as Vietnam is quickly becoming a technology hub for investors, with the Information Computer Technology sector bringing in $6.26 billion in revenue in 2009 alone, amounting to 7 percent of the country’s GDP.
A sticking point for Foxconn, however, may be the planned wages and working conditions of the new plant, which the Vietnamese government may want improved over similar wages and conditions in China. If they want more money for employees then the project could become significantly costlier, which would explain the financial difficulties and the long-standing delay.