Foxconn Technology has been investing steadily in India for the past 15 years. The company, the world’s largest assembler of Apple iPhones, now operates plants in three Indian states and has partnerships to manufacture technological equipment in four others. Foxconn did not confirm that it was investigating a transfer of iPhone production to India, nor an explanation of the reasons for the project. Foxconn will invest $ 356 million in handset manufacturing by expanding its plant in the state of Tamil Nadu.
This makes sense, as a manufacturing base in India would reduce the costs for Foxconn and Apple to sell to the growing number of middle-class consumers in the country. Foxconn has diversified geographically over the last eight years to compensate for the problems encountered in its traditional factory center in China. Some experts have speculated that Indian officials might have prompted the assembler to change or develop some of its iPhone production. Everyone wants things to be made in their own country, and India is a big market, according to John Brebeck, senior advisor at Quantum International Corp.’s investment advisory firm in Taiwan.
The Advantages Of Manufacturing In India
The Indian middle class has between 300 and 600 million people, according to recent stats. According to forecasts by McKinsey & Co., the country will move from the being the 12th largest world market in 2007 to the 5th largest market in the world. For Apple, these figures correspond to more people who can afford its high-end handsets. Localized production would eliminate Indian import duties on finished gear and reduce shipping costs, thus lowering unit prices.
To date, consumers have been focusing on cheaper Android phones, such as Xiaomi’s handsets made in China and holding a 22% market share of the Indian market. The iPhone had only a 1% market share in mid-2018. Also, Indian officials have proposed to Foxconn an agreement similar to that proposed by the US state of Wisconsin to the US government in Wisconsin two years ago to open a $ 10 billion flat panel manufacturing plant. However, Indian Prime Minister Narendra Modi is trying to attract more foreign capital to support economic growth.
With this in mind, investors can avoid taxes on domestic purchases of goods to be assembled in special economic zones and benefit from value-added tax cuts for exports of components purchased in India. Foxconn may have been Promised Land price reductions and tax breaks. The government would need help to develop the iPhone assembly in India. Apple is also changing its production base because of customer demands. The Silicon Valley Company spoke to Indian officials about obtaining tax exemptions on the materials, components, and equipment used for iPhones. The “rise of nationalism in the world” has already led many high-tech companies to locate their operations in a growing number of countries.
Diversifying Production across The Globe
Additional production in India would correspond to Foxconn’s geographic diversification over the last decade. First, the profitable Taiwanese company, with consolidated sales of $ 152 billion in 2017, produces most of its Apple hardware in China. Given the wealth of its supply network, Foxconn is not likely to replace China in a simple way or in a short period of time. But US tariffs imposed by the trade war threaten Apple’s returns on products shipped from China.
In any case, labor costs are rising in China, which deters new investment in manufacturing facilities in general. A series of worker suicides in 2010 and protests against the reputation of Apple’s Foxconn facilities and other assembly customers. Subsequently, the company, led by billionaire Terry Gou, began expanding its operations abroad with investments in R&D in Indonesia, the development of robotics in the United States and, more recently, negotiations in Hanoi for the creation of an iPhone factory in Vietnam, among others. The move to India doesn’t indicate complete shift from China.