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Trade war

Foxconn looks to move server production back to Taiwan for security

Island could become a "technology buffer" in US-China trade war, Terry Gou says

Foxconn Chairman Terry Gou (second from left) signs a memorandum of understanding with Kaohsiung Mayor Han Kuo-yu on March 17 to purchase agricultural products from the city to help feed Foxconn's more than 1 million employees.

KAOHSIUNG, Taiwan--- Foxconn is considering shifting some server production out of China and hiring up to 3,000 high-end software engineers for a big-data processing hub in this southern Taiwanese city, citing cybersecurity concerns amid the ongoing trade war between Washington and Beijing, Chairman Terry Gou said.

"We don't know how the U.S.-China trade war is going to develop," Gou told a press conference in Kaohsiung on Sunday afternoon. "Some sensitive data has to be stored in a third-party location and Taiwan is a neutral location between China and the U.S."

"We've been asked by many clients to store data in Taiwan ... because the government here cannot ask us to share the data," the chairman said.

Gou's remarks came as the U.S. and China negotiate a final deal to resolve prolonged trade conflicts and technology disputes. Washington has consistently accused Beijing and its companies, such as Huawei Technologies, of posing a security threat, stealing trade secrets and carrying out forced technology transfers on U.S. companies. Beijing and Huawei have denied any wrongdoing. Huawei recently hit back with a lawsuit against the U.S. government.

Foxconn Technology Group, which trades via the listed Hon Hai Precision Industry, is not only well-known as a major iPhone assembler but also builds servers, storage and telecom equipment for clients such as HP, Dell EMC, Huawei, Ericsson, Nokia and Cisco.

Gou said he is considering moving some production of data-processing-related products from Foxconn plants in the Chinese cities of Tianjin and Shenzhen back to Kaohsiung, where his company years ago built a software research and development center.

Gou said Foxconn plans to expand the R&D center by recruiting up to 3,000 artificial-intelligence workers in the next two years, up from the about 300 software engineers there now. Foxconn aims to build Kaohsiung into the company's global data-processing hub for AI, big data for health care, and automotive and industrial applications, he said. The chairman added that the company could build a new facility in the city to address the potential production transfer.

"We will start looking for plots of land tomorrow [Monday] with the assistance of Kaohsiung's municipal government," Gou said. "We also need to evaluate if the cost here can compete with [the cost] in China."

The requests to store sensitive big data on the island seems to come from both American and Chinese clients.

"There is a lot of sensitive information [related to our customers] from the U.S. that we cannot send to China so we will filter that data in Kaohsiung," Gou said. "Meanwhile, data from China [customers] is the same."

Gou said Taiwan owns a key position that could serve as a "technology buffer" amid the trade war between China and the U.S.

"Not Japan, not [South] Korea, not Singapore, but Taiwan could do it," he said. "Taiwan, especially Kaohsiung, is blessed to have the geographically closest proximity to either China or to the U.S. We can be the data transfer hub."

Foxconn is studying the feasibility of shifting some production back to Kaohsiung, but is still at a preliminary stage, according to a source familiar with the plan.

"We will check thoroughly whether there is enough land locally, as well as the investment environment, before really making a final decision," the person added.

Foxconn is not the only company to consider shifting data-center-related products out of China. Lite-On Technology, which counts Dell EMC, HP and IBM as clients, is building a 10 billion New Taiwan dollar ($324 million) plant in Kaohsiung to make power components for servers, at the request of American clients citing cyberespionage risks from Beijing, the Nikkei Asian Review has reported. Quanta Computer, a key data center integrator for Google, Facebook and others, also has moved some server assembly back to Taiwan owing to tariff and information security concerns, an executive previously told Nikkei.

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