Home / Opinion / Views /  Why labour trouble at TN iPhone factory is bad news

For the world’s most valuable company, the growth path in India is riddled with challenges. Apple, the world’s biggest company by market value, saw industrial relations trouble in India when its supplier Foxconn witnessed a plant shutdown earlier this week. According to media reports, over 150 employees at the production facility near Chennai were hospitalised due to food poisoning at the factory’s dormitories. There were protests by workers and their families. The plant makes iPhone 12 models, and reports say that a trial production of iPhone 13, the latest version of the flagship phone, was underway there.

The stoppage of work is bad news for a company that sells over half a billion dollars worth of iPhones every day worldwide. It is not the first incident. In December 2020, employee protests caused damage to property at a factory run by Wistron, another supplier to Apple. The incident in India adds to the overall disruption in the global supply chain for Apple. The company faced component shortages for most products during the pandemic and warned of similar disruptions in the future while explaining them in the annual report for 2021.

And neither is the development good news for India, keen to fight the image of a difficult country to do business in, especially for its labour market issues. Companies avoid hiring full-time workers to avoid the stringent regulations around termination of employment. Problems with contract workers have been recurring. Previously, automobile companies such as Maruti Suzuki, Honda, Bajaj Auto, Renault-Nissan have faced plant shutdowns due to labour disputes.

While India must pursue investments and jobs doggedly, it should not come at the cost of poor treatment of workers. The Chennai incident must be investigated and action taken if there have been lapses, while ensuring minimal disruption.

For Apple, India accounts for less than 1% of the company’s global revenue. Recent reports have suggested Apple was looking to move significant manufacturing capacity to India. Senior executives from the company have often described India as an important market. On the ground, though, there are red flags. Apple CEO Tim Cook made his first trip to India amidst fanfare in 2016. Since the company started assembling iPhones through suppliers in India in 2017, Cook has not visited India. Apple was supposed to launch its flagship retail store in 2019. However, covid-19 pushed back that plan too.

In 2016, Cook signed deals worth $275 billion to get the Chinese authorities to relax the pressure on businesses, according to a Reuters report. Large countries push global companies for technology transfer or investments to create local jobs. The Chinese way worked because Apple sold goods and services worth $68 billion in China in the year to September 2021. Since 2016, Apple is believed to have already generated revenue equivalent to the deals signed.

India is in no position to push Apple into doing anything. However, it needs to do everything possible to make it attractive for Apple to manufacture and sell more products in India. The presence of the Apple eco-system can create high-value manufacturing and services jobs India badly needs. New Delhi has made concerted efforts to attract companies like Apple to manufacture through a production-linked incentive or a PLI scheme. Pegatron, Apple’s third supplier, registered a subsidiary recently and is looking to manufacture under the PLI scheme for electronics announced by the government.

Rating agency Moody’s flagged a risk to Apple operations if US-China relations deteriorate. India must project itself as a credible second base for Apple after China. Incidents like the plant shutdown in Chennai could be detrimental to India’s efforts in that direction. Countries like Vietnam are already vying for manufacturing opportunities. Lego, the Danish toy company, recently announced setting up a $1 billion plant in Vietnam. India can ill-afford another round of loss to Asian tiger economies. A repeat of the 1970s and 1980s where smaller Asian countries stole the march in manufacturing from India would end any ‘Make in India’ dreams.

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