Foxconn to make more components locally to ramp up India presence

Foxconn, which assembles iPhones for Apple, is also looking to assemble and make more components for other companies, including Google's Pixel smartphones, said the people quoted earlier, speaking on the condition of anonymity.

“While the early investments in the current tranche will go into expanding its assembly lines, Foxconn in India is looking to expand its presence in the country’s electronics sector beyond catering to the assembly of Apple’s iPhones," said one of the three people quoted earlier.

“This includes assembly lines for other manufacturers, as well as new product categories themselves," the person said. “The company will also be investing in new component manufacturing, since it already does a significant amount of backward integration in India—and will localize more going forward."

On Monday, a spokesperson for Foxconn clarified in response to a questionnaire by Mint that the contract manufacturer’s investment of $1.5 billion in the country was already announced in May.

The company did not comment on its investments in components in India.

“We already saw Foxconn commence assemblies of Pixel phones for Google through a dedicated subsidiary last year, in India. Now, it’ll cater to more," said the first person cited earlier.

Two of the people cited above said that the company is already engaged in ramping up localization of components such as device moulds and casings to increase value addition from local manufacturing operations. It will also help Foxconn expand its margin, the second consultant said.

Over the last decade, Foxconn has committed $11.5 billion in the country. It first announced a $5 billion investment in 2015. Last August, company chairman Young Liu said that its India investment has crossed $10 billion.

Its subsidiary, Bharat FIH Ltd, already assembles two-thirds of nearly 25 million iPhones in India, with plans to double local production in light of current tariffs.

“Such kind of margin expansion is crucial, since pure-play assembly work is very low margin—which in the long run is not the most sustainable," said Ashok Chandak, president of India Electronics and Semiconductor Association (IESA) “Plus, with the Centre focusing on ECMS, Foxconn will gain from ramping up localization of components—and it already has a strong, established base in the global component supply chain to be able to attract foreign sub-vendors of raw materials to come to India."

Component push

Foxconn isn’t alone. Tata Electronics, which assembles a third of all iPhones for Apple in India, is also ramping up local component manufacturing. On Tuesday, it reportedly acquired the India manufacturing division of Chinese supplier Justech Precision to ramp up local value addition. The company is also setting up India’s first modernized commercial semiconductor fabrication plant and a chip packaging facility to become a fully backwards-integrated manufacturer.

Others such as VVDN Technologies are also taking the same approach, albeit beyond smartphones.

“The move reflects a larger play by Foxconn in line with the direction that the central government is pursuing," said Tarun Pathak, cofounder and partner at tech research firm Counterpoint. “Foxconn has established itself in India as a large-scale electronics assembler over the past decade, ramping up component localization through joint ventures and subsidiaries. Now, it is likely to pursue its third phase of India operations, as it seeks more local components in line with the current government’s initiatives."