In Kunshan, China’s Foxconn nerve centre, old tech tries to learn new tricks

As China undergoes a sweeping economic transition, its regions are also in the process of embracing change. The powerhouses of yesteryear must adapt or risk falling behind, as traditional industries become less reliable growth drivers and new sectors take prominence. In this series, we explore three representative areas of the country as they attempt to navigate this rapidly changing environment. After a 900km (559-mile) journey at the end of last month’s Chinese New Year holiday, 24-year-old Ma Xuan stood outside the gates of a Foxconn factory in Kunshan in the quiet of early morning, his luggage at his feet. But the spark that once drew millions of migrant workers to Kunshan – a city in China’s eastern province of Jiangsu long dubbed “Little Taipei” – is flickering, as old technology dreams fade and new ones emerge. “A decade ago, every young person coming to Kunshan hoped to get into Foxconn, but now it is just not the ‘golden bowl’ it used to be,” Ma said. Ma, who hails from central China’s Henan province, is a small part in a massive machine that is being rebuilt. For three decades, Kunshan, a county-level city that is part of Suzhou, was home to around 100,000 Taiwanese residents and a supply chain that produced one-third of the world’s laptops – making it the ultimate symbol of cross-strait economic integration. New Taipei City-based Foxconn Technology Group, the world’s biggest maker of electronic components by revenue and a key supplier to Apple, set up its first plant in Kunshan in the 1990s. It was at the vanguard as Taiwanese manufacturers expanded their presence in mainland China’s electronics supply chain, capitalising on the city government’s supportive policies and Kunshan’s location next to Shanghai. Now young people are all looking elsewhere – either to the local firms or back inland Ma Xuan, former Foxconn worker But the economic landscape has been changing, as rising labour costs, geopolitical shifts and China’s push for technology self-sufficiency force Kunshan to transition from a low-end assembly hub into a hi-tech fortress of AI, new energy and the “low-altitude economy” centred on drones and flying cars. After working in the Foxconn plant for three years, Ma is looking for a new job. “Now young people are all looking elsewhere – either to the local firms or back inland where the cost of living doesn’t eat our whole pay cheque,” he said. The nature of jobseeking has changed in Kunshan as the city looks for new engines to drive its economy – which has ranked first among China’s nearly 400 county-level cities for over 20 years. According to official records, Taiwanese companies still have a strong presence in the city. They show that by the end of last year, the city had approved a total of over 6,200 Taiwan-funded projects – up from more than 5,300 at the end of 2020 – with a total investment value exceeding US$70 billion. But Hsu Jie-ying, a Taiwanese restaurateur who runs a small eatery near Kunshan’s Huiju Temple, where the city’s Taiwanese community honour the sea goddess Mazu, said she had seen the neighbourhood change. Her family history is intertwined with the city’s rise. Her parents arrived around 2000, when she said the local government was “handing out free land” to lure Taiwanese manufacturers. “At the peak, there were nearly 200,000 Taiwanese in the city,” Hsu said. “Now, many factory owners have realised the labour costs are just too high. They’ve sold the facilities to mainland Chinese manufacturers, or moved deeper into inland China.” As Taiwanese plants have scaled back, domestic champions have been keen to fill the vacuum. Chief among them is Luxshare Precision, a major rival to Foxconn. Luxshare co-founder Wang Laichun, once a worker on a Foxconn assembly line in Shenzhen, is now one of the world’s richest self-made women, with her company effectively becoming an anchor of Kunshan’s economy. It has swallowed up the Kunshan assets of a number of Taiwanese competitors, buying Wistron’s iPhone factory in 2021 and taking a majority stake in contract electronics manufacturer Pegatron’s Kunshan plant in 2023. In February last year, it doubled down with plans for a 12 billion yuan (US$1.74 billion) base for smart terminals and wearable devices in Kunshan – the biggest investment project the city had seen in three years. Wang’s company has also been stepping up efforts to diversify its businesses beyond Apple contracts, and is beginning to manufacture products related to the fast-growing artificial intelligence sector. A project that kicked off last month will see it produce AI servers and personal computers in an “AI industrial estate” in the city. It is a shift that mirrors Kunshan’s broader industrial evolution. A road map issued by the city government calls for its main economic drivers to pivot from the laptop and Apple chains to the “intelligence chain”. Already the first county-level city in China with gross domestic product above 500 billion yuan, Kunshan’s pursuit of strategic depth saw its GDP grow 5.8 per cent year on year last year to 561.5 billion yuan, outpacing the growth rates in Suzhou as a whole as well as Jiangsu province. The city has maintained an average economic growth rate of 5.5 per cent for the past five years, with the combined output value of its electronics and equipment manufacturing industries exceeding 1 trillion yuan during the period. Sitting at the heart of the Yangtze River Delta area, with Shanghai to the east and Suzhou to the west, Kunshan possesses “unique geopolitical advantages” related to its proximity to both Shanghai and Taiwan, said Yao Rongwei, chief researcher at Shanghai-based think tank Hualue. Yao said the city should take advantage of the opportunities presented by the rapid advancement of AI – particularly embodied intelligence – and transform its electronics industry into a comprehensive “super industry cluster”. Beyond AI, Kunshan’s future is also being written in the air as the country’s flying car ambitions take off. On the outskirts of the city, a futuristic silver aircraft lifted off on a recent afternoon, its rotors humming like a swarm of bees. The Matrix electric vertical take-off and landing (eVTOL) aircraft, said to be the largest of its kind in the world, was developed by AutoFlight, an aviation start-up backed by Contemporary Amperex Technology Ltd, the world’s largest maker of electric vehicle batteries commonly known as CATL. AutoFlight set up its flight testing hub in Kunshan in 2022, with the aim of making it an “integrated platform” for eVTOL testing, production and deliveries, Pierre Lin, the company’s head of operations, said last month, crediting the establishment of the facility to “the help from Kunshan government officials”. China’s 15th five-year plan, which was approved by the National People’s Congress at its annual meeting in Beijing this month, officially elevated the low-altitude economy to a “key strategic emerging industry” for the first time. Kunshan has built 73 low-altitude take-off and landing facilities, 10 of which have been integrated into a larger “low-altitude infrastructure intelligent network platform” in Suzhou. Since the beginning of last year, Kunshan has signed agreements related to 18 low-altitude economy projects with a total investment value of nearly 4.5 billion yuan, according to official data. Kunshan’s transformation is also part of a broader metamorphosis in Suzhou as a whole. Serving as Jiangsu’s economic powerhouse, Suzhou’s GDP hit 2.77 trillion yuan last year, ranking sixth among Chinese cities and trailing only Shanghai, Beijing, Shenzhen, Chongqing and Guangzhou. Apart from Kunshan, another focal point of its economic success story is Suzhou Industrial Park (SIP), a landmark China-Singapore collaboration that has evolved from a manufacturing zone into a global innovation hub. The park, established in 1994, now hosts nearly 1,900 AI-related enterprises, contributing to total output valued at more than 120 billion yuan a year. In a road map rolled out last year, park management said it aimed to host over 2,100 AI companies by 2027, along with “at least 50 application scenarios” ripe for widespread adoption. To better support local start-ups, it is encouraging the establishment of “one-person companies”, a concept that is booming because it enables solo founders to achieve massive scale by replacing human staff with AI agents like OpenClaw. Liu Xiaoyu, who works in the industrial park, said that 10 years ago people thought of Suzhou as a “manufacturing hub for foreign giants such as Samsung and Bosch, but now we increasingly talk about the rise of local tech firms”, giving the examples of robotic vacuum maker Dreame and autonomous driving start-up Momenta. Even foreign companies are treating Suzhou more like a brain driving their China strategies than a low-cost workshop. In August, Bosch signed a deal with SIP to invest 10 billion yuan in research and development, talent acquisition and production focused on “full-stack intelligent assisted driving systems and intelligent cockpit products”. But competition is fierce, even within Jiangsu. Wuxi, on the other side of Lake Tai, is carving out a niche as a semiconductor hub, anchored by massive plants for South Korea’s SK Hynix and China’s second-largest chip foundry, Hua Hong Semiconductor, while Nanjing, the provincial capital, is leveraging its university talent to dominate software and biotechnology. Back in Kunshan, the Taiwanese companies that have decided to stay are revamping their factories as they seek ways to survive. Even at Foxconn, the “Foxconn model” that relied on massed ranks of human assembly line workers is being dismantled, with investment being directed for more than a decade to automating production processes. In the five years to 2017, a production line in the city run by Foxconn subsidiary FIT Hong Teng, which makes precision interconnect components and connectors, slashed its human workforce by 73 per cent – from nearly 3,000 workers to just over 800 – while increasing its output value by nearly 40 per cent. At the Computex Taipei tech expo in May last year, Foxconn chairman Young Liu said AI agents could accomplish up to 80 per cent of basic tasks in factories in the future, leaving the most complicated 20 per cent to skilled human labour. Hsu, the Kunshan restaurateur, said: “The Taiwanese companies that stay are the ones that are willing to embrace technology.” For workers like Ma, the transition is bittersweet. He said he might end up working for a mainland firm like Luxshare or decide to move to a more affordable city. “The city has grown up, and so should I,” he said.

In Kunshan, China’s Foxconn nerve centre, old tech tries to learn new tricks

.css-1c6uqr6{color:inherit;font-weight:inherit;font-size:inherit;font-family:inherit;line-height:inherit;overflow-wrap:break-word;}City at heart of Yangtze River Delta region sees new tech dreams emerge as old ones based on mass production of electronics fade

City at heart of Yangtze River Delta region sees new tech dreams emerge as old ones based on mass production of electronics fade