In early December, there were industry reports that Foxconn (also known as Hon Hai, the parent company of Foxconn) would add a $1.6 billion investment in India to establish a new factory. On December 13, the Karnataka state government in India announced in a statement that Foxconn plans to make an additional investment of 139 billion Indian Rupees (approximately $1.67 billion or about 120 billion Chinese Yuan) in the Karnataka state. This additional investment will be used to build a new manufacturing facility in Devanahalli Taluk.
Despite facing significant challenges in India, including strikes, arson, and tax issues that resulted in substantial losses, Foxconn has chosen to invest heavily in building a factory in India. What are the reasons behind this decision?
Foxconn’s earliest investment in India
According to a report by India’s “Business Standard,” Foxconn first dipped its toes into the Indian market as early as 2008. However, Foxconn moved the Apple iPhone assembly line to India in 2017, and production of the latest Apple products in India began in 2020.
Foxconn’s initial investments and factory construction in India were in 2006, when the first-generation iPhone had yet to be released. At that time, Foxconn established a mobile phone assembly plant in Tamil Nadu, primarily serving Nokia. As Nokia’s presence in the Indian market declined, Foxconn gradually reduced its operations in India, leaving only two factories with a decrease in the workforce, from over 30,000 employees to less than 2,000 by 2014.
On January 9, 2007, Apple officially released the first-generation iPhone. Foxconn started collaborating with Apple in 2006, manufacturing the first-generation iPhone and eventually becoming the world’s largest iPhone contract manufacturer. It’s estimated that nearly 90% of iPhone products are produced in China.
However, during the nearly ten years from 2006 to 2015, Foxconn did not make significant investments or establish factories in India, possibly due to Apple’s rapid growth and demands.
In 2015, Foxconn planned a $5 billion investment in India.
In early August 2015, reports from Indian media indicated that Foxconn had signed a memorandum of understanding with the Maharashtra state government to invest $5 billion in building a factory on a 1,500-acre site.
At that time, Foxconn stated that the factory’s location had yet to be finalized but emphasized a focus on Maharashtra for the initial stage. The factory was expected to have manufacturing and research departments that produced thin-film transistors (TFT) and semiconductor products.
According to Foxconn’s founder and president, Terry Gou, Foxconn’s decision to choose Maharashtra was based on Mumbai, the financial center of India, with an abundant talent pool, thriving startups, and well-developed infrastructure.
In May 2015, Gou announced plans to invest $5 billion in India over five years, establishing 10-12 mobile manufacturing plants and data centers across 12 states. Foxconn was also in discussions with Gujarat, Telangana, and Andhra Pradesh governments regarding the selection of factory locations.
Apart from manufacturing, Foxconn started investing in other sectors in India in 2015. They collaborated with the Whistling Woods International Film School for content creation and announced a $200 million investment in the major Indian e-commerce platform Snapdeal on August 18, 2015.
Foxconn’s decision to invest heavily in India and establish factories wasn’t an independent choice but possibly aligned with Apple’s strategic goals. At that time, Foxconn had production facilities in more than ten countries, including Vietnam, Brazil, and Mexico, and had approximately one million workers in China, with a massive factory in Zhengzhou.
Around 2015, as China’s economic growth slowed, Foxconn’s $5 billion investment decision in India sparked concerns in various sectors in China. In 2016, there were public expressions of concern in mainland China with slogans like “Don’t let Foxconn run away.” As Foxconn faced initial challenges in its large-scale investments in India, there were responses in China expressing that India’s tactics were complicated and they should return to the mainland.
This historical context provides insights into Foxconn’s journey in investing and establishing factories in India, highlighting the evolving landscape of global manufacturing and the complex factors influencing such decisions.
In 2016, Foxconn faced setbacks in its investments in India.
In November 2016, the Indian government announced the demonetization of high-denomination currency notes, leading to a severe cash crunch. This resulted in a 50% drop in Foxconn’s income in India, forcing the company to reduce its production volume by half.
Local media reported that Foxconn’s manufacturing plant in Sri City, Andhra Pradesh, became a victim of the currency policy. Four of the multiple buildings in the industrial area had to temporarily shut down, with about a quarter of the approximately 8,000 employees being placed on paid leave for two weeks. If Foxconn couldn’t restore its production volume to 2 million monthly units by January 2017, further employee leaves were expected.
Despite these challenges, Foxconn continued to invest in India in 2017.
In 2017, Foxconn planned to invest 60 billion rupees to establish a factory in India.
In December 2017, according to the Economic Times of India, Foxconn submitted a factory establishment application to the Indian government. The plan was to invest ₹60 billion (approximately ¥6 billion at that time) in the Jawaharlal Nehru Port Trust (JNPT) Special Economic Zone, constructing a factory on about 1,200 acres. The project was expected to provide employment opportunities for 4,000 people.
Analysts speculated that Foxconn’s increased investment in India signaled a more active entry into the Indian market, and this factory could potentially become Foxconn’s largest production base outside of China.
By then, Foxconn had already invested over $600 million in India, excluding the promised $5 billion investment in 2015 for Nehru Port in the Maharashtra province. Foxconn had five factories in Sri City, Andhra Pradesh, producing nearly 15 million mobile phones annually for brands such as Xiaomi, Nokia, Gionee, and its brand, InFocus. Foxconn planned to double its capacity in India and considered additional locations for new factories.
However, India publicly stated that Foxconn’s plan had been delayed, saying that “Foxconn has stopped communicating with us” regarding the project.
In July 2018, there were reports that Terry Gou personally went to India to sign a contract.
In July 2018, there were reports that Foxconn’s plans for a factory in India had new developments.
Foxconn executives held talks with officials from the Maharashtra state government on July 14, 2018, followed by a meeting with Chief Minister Devendra Fadnavis. Reports indicated that Terry Gou, Foxconn’s founder, planned to visit India in August 2018, possibly to sign a formal agreement.
The background of this development is traced back to Foxconn’s 2015 announcement of a $5 billion investment in Maharashtra to build a mobile and components factory, creating 50,000 jobs by 2020. While Foxconn continued progress on its factories in other parts of India, the Maharashtra project faced delays.
Foxconn had informed Maharashtra that the factory would be in the Jawaharlal Nehru Port Trust’s Special Economic Zone and had already bid for 45 acres of local land. Foxconn officials mentioned a need for an additional 200 acres. Feeling Foxconn’s sincerity, Fadnavis wrote to the Union Minister of Transport and Highways, Nitin Gadkari, requesting the allocation of 200 acres of land for Foxconn. In addition to the JNPT area, Foxconn hoped the state would provide several hundred additional acres of land.
Reports indicated that Maharashtra offered a series of incentives to attract Foxconn’s investment, such as Foxconn’s proposal to waive the 11.5% import duty on mobile components. In early 2017, the state suggested compensating Foxconn for the tariffs paid through grants or subsidies. However, these incentives did not lead to immediate progress in Foxconn’s factory construction.
If everything proceeded as planned, the Maharashtra factory would begin construction in August.
However, in August 2018, there were no reports of “Terry Gou from Foxconn visiting India for signing contracts.”
Foxconn did not fulfil its investment commitments, which was not a new development. When Foxconn announced a $10 billion investment to build an LCD panel factory in Wisconsin, USA, local opinions cautioned against offering subsidies cautiously, citing Foxconn’s history of not fulfilling investment commitments.
In June 2018, Foxconn’s new factory in the United States received a $4 billion subsidy.
In June 2018, according to foreign reports, Foxconn’s new factory in Wisconsin, USA, was about to begin construction. However, the state government and local officials paid a high subsidy of about $4 billion for this new factory.
Wisconsin had initially proposed a $3 billion subsidy to attract Foxconn to build a display factory in Racine County. The subsidy the local government gave to Foxconn exceeded the initial estimate by nearly $1 billion. This meant that the subsidy cost per person for the 13,000 local employees Foxconn was planning to hire was as high as $307,692. Subsequent local media reports suggested that the stimulus measures could reach $4.5 billion.
The deal was controversial from the beginning. Even without considering the rise in costs, Wisconsin was unlikely to recoup its investment in Foxconn within 25 years. There were reports that Foxconn might have yet to invest the initially promised $10 billion and planned to scale down the factory, focusing on small-sized displays.
At that time, bringing back manufacturing jobs to the United States was a top priority for the Trump administration, leading to the local government’s costly efforts to bring back manufacturing operations.
However, as of December 2023, Wisconsin’s highly anticipated Foxconn project had become a symbol of failure, bringing significant economic burdens to the local government and residents. The project’s progress lagged far behind the original plan, with the factory’s scale significantly reduced and the expected number of job opportunities greatly diminished. The initial plan to build a liquid crystal display manufacturing plant shifted to primarily research and engineering projects rather than large-scale manufacturing.
In December 2018, Foxconn prepared to invest 25 billion rupees in India to produce the iPhone X.
On December 28, 2018, according to CNBC, Apple was set to have its high-end iPhone X assembled by Foxconn, its contract manufacturer, in India by 2019. This move could elevate Apple’s business to a new level in India.
Sources revealed that the assembly work would take place at Foxconn’s factory in Sriperumbudur, a town in the southern state of Tamil Nadu. The Industrial Minister of Tamil Nadu, M C Sampath, also disclosed that Foxconn, which already produced phones for Xiaomi in the same facility, would invest 25 billion Indian rupees (approximately $356 million) to expand the factory for iPhone production. This investment was expected to create up to 25,000 jobs.
During this time, Apple had already assembled lower-cost iPhone SE and iPhone 6S models in India through its local subsidiary of Wistron Corp, focusing on lower-end phones for the Indian market.
However, Apple spokesperson Trudy Muller declined to comment on the news. Foxconn stated that it would not comment on matters related to existing or potential customers or their products and did not immediately respond to requests for comments on its $356 million investment in Tamil Nadu.
In 2019, Foxconn issued a four-point statement: Firmly rooted in China.
In June 2019, amid rumors of Foxconn withdrawing investments from mainland China and its chairman, Terry Gou, actively participating in the presidential election, Foxconn issued a four-point statement on June 17, 2019. The statement emphasized that the rumors were baseless, there were no signs of divestment in any of Foxconn’s mainland parks, and Foxconn would continue to root itself in mainland China for ongoing development firmly.
Foxconn Technology Group solemnly declares as follows:
The relevant rumors are all untrue information. Currently, the production and operation of Foxconn’s various parks in mainland China are proceeding in an orderly manner, with no signs of divestment.
As a globally operating enterprise, adhering to the “long-term, stable, development, technology, international business purpose, ” Foxconn has invested in mainland China since 1988. Over the past 31 years, with the pace of reform and opening up, Foxconn has grown and developed together with the mainland. In the future, Foxconn will continue to firmly root itself in the mainland for deep cultivation and development.
Foxconn has always regarded mainland employees as the group’s most valuable asset. Combining the group’s transformation direction of “cloud, mobile, intelligence, big, network + robotics,” Foxconn will continue to promote the talent localization, localization, and rejuvenation of the group’s talents, helping mainland industrial workers transform and upgrade.
In response to the recent deliberate misinterpretation of facts and malicious smearing of Foxconn by individual self-media, we will reserve the right to defend the group’s image and interests through legal means.
In January 2020, did Foxconn cancel its plans to build a factory in India?
On January 7, 2020, there were media reports that the trade deal for Foxconn to establish an electronic manufacturing factory in collaboration with the state of Maharashtra in India was cancelled due to internal disputes between Foxconn and Apple. The deal, valued at $5 billion, was part of a 2015 agreement between Foxconn and India to establish 10-12 factories in the country to produce consumer electronics by 2020.
However, Subhash Desai, the Minister of Industries for Maharashtra, announced that the deal with Foxconn had been cancelled due to Foxconn’s failure to fulfill its investment commitments and that it could not be revived in the future.
Foxconn responded that the media reports about differences in opinions with the customer regarding setting up a factory in India were inaccurate. It clarified that the production progress in collaboration with the main customer in India was smooth and denied any issues.
In June 2020, India launched a 500 billion rupees incentive plan.
In early June 2020, the Indian government announced a 500 billion rupees (approximately $6.65 billion) incentive plan to attract global companies to invest in manufacturing smartphones and related components. The Ministry of Electronics and Information Technology unveiled three plans, namely the Production Linked Incentive (PLI) scheme, the Scheme for Promotion of Manufacturing of Electronic Components and Semiconductors (SPECS), and the Modified Electronics Manufacturing Clusters (EMC 2.0) scheme, with a total expenditure of 500 billion rupees, with the majority allocated to the PLI scheme.
According to ETTelecom, Apple’s iPhone contract manufacturers Foxconn and Wistron, as well as local Indian smartphone manufacturers Karbonn, Lava, and Dixon, had applied for the PLI scheme, which had a total value of approximately 410 billion rupees. This program aimed to establish India as an export hub, competing with electronic powerhouses in Northeast Asia.
An industry executive revealed, “Foxconn has applied through its subsidiaries Hon Hai and Rising Stars Mobile, and the local Indian phone maker Micromax will also apply.”
Ravi Shankar Prasad, the Minister of Technology for India, stated that the Production Linked Incentive (PLI) plan proposal would provide a range of incentive measures. Manufacturers exceeding the benchmark for locally produced mobile products in the next five years would receive additional financial rewards.
Prasad mentioned that the measures allowed companies to export 60% of their production overseas. After implementation, it was estimated that the value of smartphones and components produced.
In 2020, China contributed nearly 20% to Apple’s total revenue, leading Apple to consider diversifying its production away from Chinese manufacturers. By the end of 2020, Apple had achieved unprecedented success in the Indian market.
After discussions with Apple, Foxconn possibly decided to increase its investment in the Indian region by an additional $1 billion, even considering relocating eight production lines from mainland China. After thorough assessments, Foxconn planned to move the production line of the iPhone 12 to India, showcasing Cook’s significant interest in the Indian production lines. However, Foxconn’s Indian factory faced various challenges, leading to its return to China.
Reports suggested that Indian workers were not accustomed to overtime and had lower work enthusiasm, resulting in significantly lower productivity than China. Additionally, India’s infrastructure needed to be improved, particularly regarding an unstable power supply, which impacted Foxconn’s production. The COVID-19 pandemic further exacerbated the situation, with a second wave hitting India, causing Foxconn’s three factories to shut down and directly reducing the efficiency of Apple’s corresponding product production by over 50%. Moreover, the production in India decreased by a third, and the increased shipping costs for electronic raw materials added pressure to Foxconn, with freight costs rising from ¥12 per kilogram to ¥38.
Due to these challenges, Foxconn’s factory in India faced difficulties, and with the imminent launch of Apple’s new iPhone 13, Foxconn, after considering various factors, ultimately chose to return to China.
In 2022, Foxconn announced a $19.5 billion investment in a chip factory in India.
The Indian government aimed to foster advanced technology industries like semiconductors and displays, offering a policy to subsidise up to 50% of the investment amount when establishing production and research and development (R&D) facilities for related products. In February 2022, Foxconn announced a $19.5 billion investment in a chip factory in India with a local joint venture partner named Vedanta.
The plan involved constructing a factory in Ahmedabad, Gujarat, in western India, for the production of semiconductors and displays. Gujarat is the home state of Indian Prime Minister Narendra Modi, and with the Indian government actively attracting semiconductor factories, Foxconn’s investment plan in India drew attention from the semiconductor industry.
However, foreign media reported that subsidy negotiations were stalled due to issues with the participation of the joint venture partner in venture capital investment. The two companies had initially planned for STMicroelectronics to participate in the venture capital investment based on the use of its technology. Still, due to the Indian government’s insistence that STMicroelectronics should invest shares in venture capital, the negotiations were delayed.
In fact, rumors of Foxconn entering the chip factory had circulated earlier. In December 2018, there were reports that Foxconn was negotiating with Zhuhai to invest approximately $9 billion (about ¥60 billion) to establish a wafer manufacturing plant. The plant, which started construction in 2020, would manufacture chips for ultra-high-definition 8K TVs, camera image sensors, and various sensor chips for industrial applications and connected devices. The wafer plant would manufacture chips for Foxconn and open contract manufacturing services for other companies.
Despite efforts to expand over the years, Foxconn’s presence in the semiconductor industry remained relatively limited compared to its flagship electronic manufacturing business and its four semiconductor-related listed companies, including the majority-owned semiconductor facility manufacturer Marketech International. Market observers pointed out that the cost of entering the chip manufacturing industry was very high, requiring tens of thousands of chip experts. Analysts at research firm Bernstein Research, such as Mark Li, stated that establishing and operating a wafer plant required accumulated experience, and it was highly challenging for newcomers like Foxconn to enter the chip manufacturing business overnight. Moreover, long-term investment was needed to drive technological profitability.
By 2022, when Foxconn announced the $19.5 billion chip factory in India, there were no further updates on the ¥60 billion investment plan for the wafer factory with Zhuhai.
In July 2023, Foxconn officially withdrew from India’s $19.5 billion semiconductor joint venture project.
Due to Foxconn’s withdrawal, Prime Minister Modi’s semiconductor industry nurturing plan will be affected.
In 2023, Foxconn made frequent moves in India.
● In January, Foxconn expanded its investment in India to cover the entire range of Apple products.
● In March, Foxconn decided to invest $700 million in India.
● In early March, Foxconn’s chairman, Liu Yangwei, visited India, met with Prime Minister Modi, and pledged to undertake another manufacturing project in the neighboring state of Telangana.
● Foxconn reiterated its commitment to investing in India, potentially including new factories and venturing into new areas such as semiconductors and electric vehicles, aiming to enhance India’s role in the global electronics manufacturing industry.
● Liu Yangwei wrote letters to the Chief Ministers of Karnataka and Telangana, expressing Foxconn’s efforts to make the manufacturing base project successful, including the construction of an iPhone components factory near Bangalore airport in Karnataka with an investment of $700 million.
● Foxconn also planned to use the factory to produce components for its nascent electric vehicle business, making it the company’s largest investment in India, which is expected to create around 100,000 jobs soon.
● By the end of March, Foxconn’s investment of 80 billion INR was approved, contributing to job creation in Karnataka.
● In April, Foxconn and Wistron, according to reports, had yet to fulfill the incentives under India’s production-linked incentive (PLI) plan despite the surge in iPhone production and exports in the past year.
● In May, Foxconn announced a $37 million land purchase for a technology center on the outskirts of Bangalore.
● In July, Foxconn cancelled its $19.5 billion semiconductor investment plan in India but planned to invest $500 million in a components factory.
● Also in July, reports mentioned Foxconn’s plan to invest $600 million in two factories in Karnataka, with $350 million intended for an iPhone components factory.
● In September, on Prime Minister Modi’s birthday occasion, Foxconn expressed intentions to double its investment and employee numbers in India.
● In September, Foxconn increased investments in assembly, chip manufacturing equipment, and mobile components in various regions of India, aiming to create thousands of jobs.
● In December, it was confirmed that Foxconn would invest an additional $1.6 billion in Karnataka for a new manufacturing plant.
Controversies surrounding Foxconn in India:
Despite generating significant employment opportunities and tax revenue, Foxconn in India has been involved in several controversial employee rights, environmental protection, and social stability incidents. Some notable examples include:
● In August 2010, an explosion occurred at Foxconn’s factory in Sriperumbudur, Tamil Nadu, resulting in one fatality and nine injuries. The investigation revealed that the accident was due to the excessive storage of flammable materials, violating safety regulations.
● In December 2020, a violent incident occurred at Foxconn’s factory in Kuruvi Marambai, Tamil Nadu, involving around 2,000 employees in a conflict with management over overtime pay. The clash led to damage and losses amounting to approximately $7 million.
● In April 2021, Foxconn’s factories in India were severely impacted by the COVID-19 pandemic, with an infection rate of up to 90% among employees and a 50% reduction in production capacity. Foxconn faced accusations of inadequate protective measures, healthcare support for employees, and delays in reporting the pandemic to authorities.
Conclusion:
From the above, it is evident that Foxconn’s investments in India have been a mix of reality and speculation. There have been two major investment plans: the $5 billion investment from 2015 to 2020 and the subsequent $1 billion investment planned in June 2021 (interrupted due to the pandemic). Many of the investments in between were more on the planning side, with fewer materializing. Additionally, due to India’s local business environment, Foxconn’s investment plans have been marked by repeated announcements and withdrawals.
India’s business environment has been globally acknowledged as challenging. Despite this, Foxconn has consistently persevered, never quickly leaving India. The main reason for this persistence is Foxconn’s nature as a labor-intensive enterprise requiring a significant workforce on assembly lines, an area where India holds a notable advantage. Data shows that India has a relatively young population, with around 950 million in the labor force in 2021 and the potential to exceed 1 billion in the next decade. This demographic advantage presents a significant labor and consumer market for Foxconn.
Publicly available data indicates that Foxconn achieved approximately NT$6.63 trillion in revenue in 2022 (around ¥1.48 trillion RMB), a 10.47% year-on-year growth. Despite maintaining high YoY revenue growth in the last two years, for a labor-intensive enterprise, stable growth requires a stable and friendly business environment, strict cost control, efficient management, and, most importantly, a well-established supply chain and resources to ensure low-cost production.
In these aspects, mainland China remains irreplaceable at present and likely in the coming years. Therefore, concerns about Foxconn leaving are unnecessary. This holds true not only for Foxconn but also for other large enterprises. During the third-quarter earnings conference, Foxconn’s chairman, Liu Yangwei, emphasized a firm commitment to investment and continued industry upgrades in November. The group’s layout in the ICT sector is based on customer demand, choosing the most suitable production bases for different products. The emphasis remains on steady investment, continuous industrial advancement, and the largest proportion of capital expenditure going into the mainland China production base for new business expansion, automation upgrades, and overall operational maintenance.