Foxcon 2317 -0.97%
Technology Group, Apple’s largest assembler Inc.
iPhones, is in talks with Saudi Arabia on jointly building a $9 billion multi-purpose facility that could make microchips, electric vehicle components and other electronics like displays, according to people familiar with the case.
The Saudi government is considering a bid from the company, officially known as Hon Hai Precision Industry Co.
, to build a two-line foundry for surface-mount technology and wafer fabrication in Neom, a tech-focused city-state the kingdom is developing in the desert, the people said. Discussions about the project began last year, they said.
The Saudis are doing their due diligence and comparing the offer to others Foxconn has made for similar projects around the world, one of the people said.
Besides Saudi Arabia, Foxconn is also discussing with the United Arab Emirates the possibility of locating the project there, one of the people said.
The Taiwan-based company has sought to diversify its manufacturing sites amid growing tensions between China and the United States that put it in a potentially vulnerable position.
Riyadh wants the company to guarantee that it will direct at least two-thirds of the smelter’s output to Foxconn’s existing supply chain, one of the people said, to ensure there are buyers for its products and that the project is ultimately profitable.
Foxconn is seeking major incentives including funding, tax exemptions and subsidies for electricity and water in exchange for helping to establish a high-tech manufacturing sector in the kingdom, said people, as Saudi Arabia seeks to diversify its economy away from oil.
The Saudis could offer direct equity co-investment, industrial development loans, low-interest debt from local banks and export credits to compete with other jurisdictions Foxconn might consider, said another person close to the talks.
Saudi authorities and Foxconn did not respond to requests for comment.
Foxconn has sought to diversify its business beyond Apple products in recent years, including expanding its business into electric vehicles. It has partnered with automakers such as Jeep and Chrysler maker Stellantis NV and Los Angeles-based electric vehicle startup Fisker.
Foxconn has also purchased semiconductor facilities, including one owned by Taiwanese firm Macronix International, seeking to become a contract manufacturer of electric vehicles for global brands. Last year it scaled back plans for an LCD project in Wisconsin after agreeing to invest $10 billion and hire 13,000 people to benefit from $2.85 billion in incentives.
The company said last year it planned to build an EV project in the Middle East, focusing on software and cloud infrastructure for passenger cars.
Saudi Arabia is trying to create an industrial sector as part of Crown Prince Mohammed bin Salman’s plans to reshape the economy by creating new industries to supplement oil revenues as the world shifts to renewable energy.
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The kingdom has used its $500 billion sovereign wealth fund to lead this effort. In 2019, he took a majority investment in Lucid Motors Inc.,
which recently signed an agreement to open its first manufacturing facility outside the United States in Saudi Arabia.
As Western companies pulled out of the kingdom after the murder of journalist Jamal Khashoggi in 2018, Saudi Arabia has struggled to reform its business climate to attract foreign investment. He wants to relocate international supply chains to the kingdom and gain market share in supply chain components. But that effort has been complicated by the kingdom’s small domestic market, high labor costs and unpredictable operating environment.
Final Saudi approval of the Foxconn deal rests with Prince Mohammed. He has been pushing for several years for the company to establish a presence in Neom, but has been skeptical of the site’s limited logistics and access to electricity and water.
—Yang Jie contributed to this article.
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