Foxconn comes, and LG and Cisco follow… In the recent one year, a great number of innovative giants have enhanced their layout in Guangzhou, leading a hot trend to make investment in Guangzhou.

 

Relevant data indicated that, in 2016, a total of 1,757 enterprises were established in Guangzhou with foreign direct investment, up 23% year-on-year. The city government approved 154 projects with total investment of more than USD 30 million. So far, 288 Fortune 500 enterprises have made investment in Guangzhou, including 120 with headquarters and regional headquarters in Guangzhou.

 

Under the current circumstance that the US manufacturers are returning home, Foxconn, LG and many innovative foreign-invested enterprises still choose to make investment in the Guangdong-Hong Kong-Macao Greater Bay Area and bring the most advanced projects to Guangzhou. What’s the factors pushing them to enhance the investment layout in Guangzhou. Related experts were interviewed to answer this question.

 

Innovation forces embedded into the innovation chain of the Guangdong-Hong Kong-Macao Greater Bay Area

 

Just as the San Francisco Bay Area has the Silicon Valley, the Guangdong-Hong Kong-Macao Greater Bay Area also has one of the areas with the strongest innovation vigor in the world. By the end of 2016, there had been 18,880 high-tech enterprises in the nine cities in the Pearl River Delta in the Guangdong-Hong Kong-Macao Greater Bay Area.

 

Last year, 2,800 more high-tech enterprises were established in Guangzhou, which is the core city in the urban agglomeration of the Pearl River Delta, bringing about a “blowout” increase of more than 100%. 

 

“Guangzhou will definitely become the leader of science and technology innovation in the future.” Terry Gou, chairman of Foxconn, not only praised Guangzhou but also “voted for” Guangzhou by bringing the world leading display project to Guangzhou.

 

On March 1, the construction of the all-ecosystem industrial park for 10.5-Generation 8K displays with investment of RMB61 billion from Foxconn, was started in Zengcheng, Guangzhou.

 

Two days later, another Fortune 500 enterprise, namely LG, made a survey in Guangzhou. The giant enterprise in the field of displays is preparing to establish its Southern China Headquarters in the Pazhou Internet Innovation Cluster of Guangzhou. Relying Foxconn, LG and other giant enterprises, Guangzhou’s output value of new-type displays is expected to reach more than RMB300 billion in 2020. That will drive the output value of the electronic information product manufacturing industry to surpass RMB500 billion.

 

Why do the two giant enterprises in the global display circle focus their attention on Guangzhou? In the opinion of Zheng Tianxiang, professor at the Center for Studies of Hong Kong, Macao and Pearl River Delta of the Sun Yat-Sen University, Guangzhou has the Guangdong-Hong Kong-Macao Greater Bay Area at its back, especially the Pearl River Delta, which is known as the “world factory”, and therefore has well-developed manufacturing industry, especially the electronic information product manufacturing industry.

 

Relevant data indicated that, the output value of the electronic information product manufacturing industry of Guangdong in 2015 reached RMB3.27 trillion, accounting for almost one third of the national total. Take mobile phones for example. Five of the world's top 10 vendors of smartphones by global shipment volumes are located at the Pearl River Delta. In addition, 80% of the added value of the electronic information product manufacturing industry of Guangdong is achieved at the east bank of the Pearl River Delta.

 

Whether for stabilizing the mobile phone and TV markets or entering the fields of displays for health care and smart city construction, both Foxconn and LG will not neglect the role of the Pearl River Delta. Just as Terry Gou said, “From Shenzhen, Foshan, Zhongshan and Zhuhai to Guangzhou, investment in real economy has been enlarged step by step along the Pearl River Delta Ring Expressway in the past 30 years, hoping to make this expressway comparable with the US Route 101 in the Silicon Valley to become a ring expressway of information technology and generate the effect to drive a GDP growth of five to seven times by each RMB1 output value on the industrial supply chain of the Pearl River Delta.”

 

“Among the first-tier cities, Guangzhou boasts the lowest cost of innovation.” Zheng believed that the reason for Foxconn and LG to choose Guangzhou is that there are opportunities for them to be embedded into the innovation chain of the Pearl River Delta and benefit from the low cost under the innovation environment of Guangzhou. Guangzhou is low-lying land among the first-tier cities in terms of costs. It has low-cost land as well as relatively reasonable housing price. It can help Foxconn and other enterprises engaged in real economy further reduce labor cost. The fact that Guangzhou ranked top among first-tier cities in terms of increase of permanent population provides a good testimony.

 

Talent dividend: Foxconn to recruit 50,000 to 100,000 masters and doctors

 

“Guangzhou has a great number of talents,” Terry Gou said, explaining the reasons to settle down in Guangzhou.

 

As the biggest electronics manufacturer in the world, Foxconn manufactured 40% of the global consumer electronics, including the Apple iphones and many other best-selling products, for which Foxconn serves as an OEM.

 

However, low profit and a number of other factors cast a shadow over the OEM circle. Foxconn is trying to “tear off” the label of OEM and enter the smart manufacturing and industrial Internet sectors.

 

Through acquisition, Foxconn acquired the technology for the 8K display to be developed in Zengcheng from Sharp, which is a leader of the global display industry. This technology enables people to see things that they cannot see with naked eyes and provides precise image data to promote the combination of artificial intelligence and medical services. Foxconn said, the 8K ultra-high-resolution LCD screen will lead to a revolution of image data in the fields of industrial Internet, Internet of Vehicles, entertainment, medical services and education.

 

Of course, from traditional manufacturing to smart manufacturing, from OEM to independent innovation, Foxconn is eager for talents. At the groundbreaking ceremony for the all-ecosystem industrial park for 10.5-Generation 8K displays, Terry Gou said that 50,000 to 100,000 masters and doctors will assemble in the park after it is built up.

 

In addition to Foxconn, Cisco, a partner of Foxconn from the United States, also settled down in Guangzhou. Also, the supply of talents is a major reason for its choice.

 

As a cultural and scientific education center of South China, Guangzhou has millions of students in colleges and universities. At the end of 2015, there were 42 academicians, 18 national engineering and technology research and development centers and 22 national enterprise technical centers in Guangzhou; there were also 19 national key laboratories, 549 provincial engineering and technology research and development centers and 247 municipal engineering and technology research and development centers.

 

“Guangzhou has talent resources that cannot be matched by other cities. There are a great number of graduates from famous universities and colleges, providing a steady flow of talents for enterprises,” said George S K Leung, advisor to the Hong Kong and Shanghai Banking Corporation Limited for Strategy and Economics in Asia-Pacific.

 

Global network: Guangzhou helps Huawei export products to Central Asia

 

There is one China-Europe train departing from Guangzhou Baiyun Daliang Freight Station every week. The electronic products of Huawei to be exported to Central Asia is loaded at the station and then transported to five Central Asian (Eurasian) countries and Russia via the Alataw Pass of Xinjiang.

 

“Guangzhou has a transportation network extending all over the world.” Zheng believed that one of the reasons for Foxconn, LG and other leading enterprises in science and technology innovation to choose Guangzhou is related to the role of Guangzhou as a hub-type network city. These enterprises need chips and other electronic components and related finished products, which need to be transported through well-developed air, shipping, railway and road transportation systems to guarantee efficient and convenient circulation.

 

Relevant data indicated that, in 2016, the passenger throughput of Baiyun International Airport reached 59.7766 million person-times, ranking third nationwide. The cargo throughput of Guangzhou’s Ports reached 544 million tones, and the container throughput reached 18.8497 million TEUs, ranking top worldwide. The volume of freight had a year-on-year increase of more than 10%, while the tonnage mileage had a year-on-year increase of 60%.

 

“Baiyun International Airport has flights to various places. Hong Kong airport even doesn’t have some of these flights. This is also an advantage of Guangzhou,” George S K Leung said.

 

As one of four major railway hubs of China and one of the major road hubs of China, Guangzhou has railway lines to Europe and other Asian countries. The China-Europe Train can carry the Chinese goods to Russia to enter the European market.

 

The intangible network is another advantage of Guangzhou. As one of the three major communication centers, Internet exchange centers and international Internet exits of China, Guangzhou plays a special role. A total of 58% of Internet of Chinese mainland connects with the Internet all over the world through Guangzhou. The Tianhe-2 supercomputer that has won the highest honors worldwide for many times is also in Guangzhou.

 

“Both the electronic information product manufacturing industry and the industrial Internet are important resources,” Zheng said, believing that these resources provide a network for Foxconn and other world-class enterprises to connect with the world and also provide strong support for innovation.

 

Source: Translated from Invest Guangzhou, March 9, 2017