iPhone Maker In India Foxconn Says China’s Days As ‘World’s Factory’ Are Over; India Will Be A Part Of Its Manufacturing Ecosystem

Taiwan multinational electronics firm Foxconn, which is a key supplier of Apple iPhones from India, has said that “China’s days as the world's factory are done” and India would form a part of its “manufacturing ecosystem”.

Foxconn’s co-chairman Young Liu told the media after announcing his company’s results that China, however, would still play a key role in the Taiwanese firm’s manufacturing.

Foxconn, registered as Hon Hai Precision Industry Company Limited, has begun to gradually shift more of its manufacturing capacities outside China. The proportion of its Chinese manufacturing activities that include making Dell desktops, too, has been brought down to 25 per cent from 30 per cent in June last year.

The shift of the manufacturing or what it terms as supply chain is in view of the current trade war between the US and China. This has ‘finished’ China as a factory to the world.

The trade dispute has seen Washington raise customs duties on Chinese products, forcing manufacturing companies to shift their base or diversify from China.

Though US and China are holding talks to reach a deal, multinational firms are of the view that China-centric supply chains will be fragmented in the long-term, with countries like Japan giving incentives to its firms for exodus from Beijing.

Sino-American relations have been strained further after US President Donald Trump issued an executive order barring US citizens from doing business with China’s Tencent Holdings Ltd, WeChat.

India will now be a part of Foxconn’s manufacturing ecosystem, which would also include South-East Asia and North America, Liu said in his media interaction.

Addressing the company’s shareholders in June this year, the Foxconn co-chairman said India was a “bright spot” in its prospectus and it “views the outlook there (India) very favourably”.

Last month, Reuters reported that Foxconn plans to invest nearly Rs 7,500 crore ($1 billion) to expand its facility at Sriperumbudur, 60 km from Chennai. The Taiwanese firm produces Apple’s iPhone XR.

Foxconn officials have said that the company will produce iPhones outside of China, if necessary. Apple is reported to have asked its suppliers to shift a part of their iPhone production out of China.

The Taiwanese firm also produces smartphones for Chinese firm Xiaomi Corp at a separate facility in Andhra Pradesh's Sri City, approximately 100 km from Chennai.

Then, Liu said: “India will be a good place to develop and we are fully working in that direction. We will share more details regarding our next step of investments (in India) in the coming months."

In focussing to ramp up its Indian production, Foxconn is also trying to take advantage of the production-linked incentive (PLI) scheme that the Indian government is offering to global companies.

The PLI scheme offers 4 to 6 per cent incentive on incremental sales of goods under target segments manufactured in India. The incentive will be available for five years with 2019-20 fiscal being treated as the base year for fixing the targets.

The global firms can expect the incentive scheme to come into play from this month.

Foxconn’s plan for Rs 7,500 crore investment over the next three years will fall under the PLI scheme as it meets the Narendra Modi government’s timeframe for it.