Huge Win For Tamil Nadu: Foxconn Picks State For Manufacturing High-End iPhone Products

In a major shot in the arm for Tamil Nadu’s attempt to regain its status as India’s preeminent electronic hardware manufacturing hub, Apple Inc is likely to begin assembling its top-end iPhones in Foxconn’s Sriperumbudur unit as early as 2019, Reuters has reported.

Reuters quoted Tamil Nadu's Industries Minister, MC Sampath, as saying that Foxconn will invest Rs 2,500 crore ($356 million) to expand its Sriperumbudur plant in the outskirts of Chennai, including investment in building a new production line for producing high-end models of iPhone. The investment may create as many as 25,000 jobs, he added.

The Economic Times reported that a mega decision is likely to be announced on 24 January, when Tamil Nadu will unveil new investments in the state during the second Global Investors Meet scheduled in January 2019.

Foxconn, a Taiwanese company, which is the world’s biggest contract manufacturer of consumer electronics, makes televisions and Xiaomi and Nokia-branded phones in India at its current production facilities at Sri City (Andhra Pradesh) and Sriperumbudur (Tamil Nadu). But this will be the first time the company will be making iPhone products in the country.

Apple assembled low-end models such as the iPhone 6S and SE models through another Taiwanese phonemaker, Wistron in Bengaluru in Karnataka, but its decision to assemble devices in the flagship iPhone X family represents a huge leap for Apple's business plans in India.

Reuters also quoted a source close to the development saying that Foxconn’s plan to assemble iPhones in India was part of its risk mitigation to limit the potential fallout of an escalating trade war between the United States and China.

Last week, The Hindu reported that the Foxconn plant would begin manufacturing various models of the iPhone, but no specific information was made available on the size of the investment and the kind of phones to be assembled.

Foxconn’s decision to scale up its manufacturing plant in Tamil Nadu comes as a major boost, given the state’s recent challenges in attracting investments thanks to a spurt in anti-industry-centric agitational politics and political turmoil. Other states like Maharashtra and Andhra Pradesh have been trying to aggressively woo the Taiwanese manufacturer.

Maharashtra has been attempting to persuade Foxconn to set up a manufacturing hub in the state. In 2015, the company even announced that it would invest $5 billion in Maharashtra to set up a plant to make mobile phones and components and help create 50,000 jobs by 2020. But not much headway was made since then, as the negotiations were deadlocked over incentives sought by the company.

However, earlier this year, reports emerged that the company plant will be set up in the Special Economic Zone of the Jawaharlal Nehru Port Trust in Mumbai and that it has bid for 45 acres and will eventually need another 200 acres.

Commerce and Industry Minister Suresh Prabhu last Friday (22 December) announced that he will be meeting top Apple executives in Davos next month to take forward the talks about setting up the company’s manufacturing units in India.

The company has requested for some tax incentives and other concessions before it commits to investing in manufacturing facilities in India. Prabhu stated that those conditions can be negotiated and that it was a good time for Apple to come to India.

“We are still talking to Apple. Negotiations are ongoing. If they agree, we would like them to set up offices in India as well. I am meeting Apple’s top leadership in Davos in early January,” the minister said in a PTI interview.

Apple sells its products through company-owned retail stores in countries like China, Germany, the US, the UK and France, among others.

According to Canalys, the number of iPhones shipped in India has fallen 40 per cent so far this year compared with 2017, and Apple’s market share is a paltry 1 per cent from an earlier share of 2 per cent. Apple India posted a dismal revenue of $1.8 billion in India this fiscal, way below what it was hoping to achieve in India.

According to analysts, Apple’s inability to make meaningful headway in the Indian market is its steadfast refusal to recalibrate its India’s market strategy on both pricing and products. It continues to prioritise a limited number of coveted products, sold at high prices. Many smartphone manufacturers, especially Chinese competitors, have a localisation strategy in plan to address Indian consumer concerns — increasing battery life, for example, and offering less expensive models.

It has no wholly-owned store in India and sells products through distributors such as Redington and Ingram Micro. The number of smartphone users in India is projected to double, to reach 829 million by 2022 from 400 million users as of 2017.

India is also emerging as a smartphone manufacturing hub, with Chinese smartphone makers such as Xiaomi, Oppo and Vivo all setting up production plants in the country. India currently has 120 mobile manufacturing units, from just two units in 2014.

Vivo recently announced that it was investing more than Rs 4,000 crore in its second production facility as part of its commitment to ‘Make in India’.