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Foxconn expands in India

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Diversifying away from China

Foxconn’s new staff in India may be eating less white rice and more chapatis but the story of their employment is essentially the same as in China: young women from poorer backgrounds find gainful but low-paid work assembling some of the world’s biggest electronics brands.

Leslie Chang’s Factory Girls told the story of the young women trying to improve their lot in Dongguan’s manufacturing plants in China’s Pearl River Delta almost a generation ago. Many complained about the cramped dormitories, long working hours and awful food (rice with a meat or vegetable).

Today’s cohort of young Indian women looks a little different. They’re usually sporting a salwar kameez beneath their uniforms and a typical potato and pea curry lunch sounds more appetising than the food on offer to their Chinese predecessors, even if the wages don’t quite match up (about $130 per month).

The world’s smartphone manufacturers are building new manufacturing hubs along India’s southeastern seaboard. Geographically it’s a good location to service global export markets, with a large labour force and India’s second largest port nearby in Chennai (formerly Madras). Localising production has the added advantage of avoiding India’s 20% import tariffs for companies keen to build their domestic market share.

The tariffs are one of the main reasons why Foxconn decided to establish its first Indian plant in Andhra Pradesh back in 2015 to manufacture phones for Xiaomi. Xiaomi is now India’s biggest selling phone brand with a 30% market share.

The Taiwanese contract manufacturer has just announced plans for another major investment 75 kilometres away across the state border in Tamil Nadu. The new factory will service Foxconn’s main customer Apple, which wants to increase its 1% of sales in the Indian market and diversify more of its supply chain away from China. Foxconn says it will invest $1 billion over the coming three years in the new facility, creating 6,000 new jobs.

Naturally, the Chinese media is sceptical that the Indian manufacturing zones will be able to repeat China’s past successes in attracting and retaining the world’s top brands. Huxiu.com’s verdict was typical in highlighting India’s “many flaws”. These were summarised as “the particularly poor quality of India’s entry-level labour, frequent power outages and bad road conditions”.

The news site further reminded readers that Foxconn had promised to invest billions of dollars in India in the past, without following through (Wisconsin in the US has a similar tale to tell).

All the same, the best of the Indian industrial zones are starting to show some of the cluster effects that have powered Chinese manufacturing prowess for years. As ever, Apple is a banner client and there were celebrations in the Indian media this year when the Californian giant said that it hoped to move a fifth of its production capacity to the country.

Taiwanese companies are at the vanguard of the wider shift to India, some of them encouraged to leave mainland China by their government (see WiC496). Wistron is another major manufacturer with a base in the Bangalore tech hub. It has been assembling Apple’s most affordable SE iPhone, plus its 6S and 7 models, in India since 2017, and it opened another plant for the iPhone 8 this year. It now makes printed circuit boards in the same location, which were previously made in China and shipped to India.

This week Wistron announced its Rmb3.3 billion ($472 million) sale of two of its Chinese factories to Luxshare, a local rival set up by a former Foxconn employee (see WiC489). The plant will assemble iPhones for the Chinese market, giving Luxshare more of a footprint in the US brand’s local supply chain (where it currently assembles AirPods and Apple watches).

Another announcement this week came from Apple’s second largest contract manufacturer Pegatron, which is registering a business in Chennai with a view to assembling iPhones in India too. Taiwan’s packaging and testing companies won’t be far behind the manufacturers and assemblers. Indeed, India’s press reports that Amkor, ASE Technology, Powertech and Siliconware Precision Industries are all in discussions with local governments about the subsidies on offer to firms that make major investments.

So far, Apple’s higher-end component manufacturers haven’t followed suit in heading for India. Lens module maker Largan Precision, for example, is relocating from China, but back to Taiwan via an NT$10 billion ($340 million) investment, creating as many as 5,000 new jobs in its home market.


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