Friday, Aug 12, 2022
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Semiconductors, EVs, And More: Why Foxconn Is Important For India?

Besides electronics, Foxconn is also looking at making electric vehicles in India. The Tamil Nadu government has already invited the company to further invest in the state

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Last week, Prime Minister Narendra Modi met Foxconn chairman Young Liu and said he welcomes the company's plans for expanding its electronics manufacturing capacity in India.

"Glad to meet Mr Young Liu, Chairman, Foxconn. I welcome their plans for expanding electronics manufacturing capacity in India, including in semiconductors," Modi said in a tweet.

"Our push for EV manufacturing is in line with our commitment to Net Zero Emission," he added.

The Foxconn chief also met Akarsh Hebbar, Vedanta Group’s global managing director of display and semiconductor business as part of a proposed partnership between Foxconn Group and Vedanta Group to set up semiconductor manufacturing in India.

Besides, Liu also met a high-powered delegation from Maharashtra and discussed its investment plans in the semiconductor and consumer electronics segments.

Taiwan-headquartered Foxconn is the world’s largest contract manufacturer, which makes smartphones for Apple, Xiaomi, hearables for Boat, and telecom and networking products for ZTE in India.

The company is trying to expand into semiconductor manufacturing and is exploring the South Asian market for its next venture. It is reportedly considering setting up an electric vehicle (EV) assembly line in India.

In Oct 2021, Foxconn unveiled three new electric vehicle (EV) models and the company looks to enter the EV business.

The company’s move comes as a part of its latest strategy to localise manufacturing efforts around the world – instead of just building in China.

For India, the timing is right as it is also looking for investments to emerge as a global semiconductor hub just as countries and industries around the world reel under Covid-induced supply chain disruptions and global chip shortage.

For this, the government has rolled out an ambitious Rs 76,000-crore program for the development of the semiconductor and display manufacturing ecosystem in the country. It aims to provide financial support to companies investing in semiconductors, display manufacturing, and the design ecosystem.

Foxconn’s India connection

Foxconn first came to India in 2006 to make handsets for Finnish handset maker Nokia with a facility in Sriperumbudur, 50 km from Chennai.

In 2014, it exited the country after Microsoft acquired Nokia and its Tamil Nadu plant faced issues. In 2015, the Taiwanese giant signed a memorandum of understanding (MoU) with the Maharashtra government to invest $5 billion in an electronics factory and an R&D centre spread across 1,500 acres that will create 50,000 new jobs.

The same year, Chinese handset maker Xiaomi announced that Foxconn will make its smartphones in India at a factory in Sri City, Andhra Pradesh.

Foxconn, had plans to develop 10-12 facilities in India by 2020 to make phones, TVs, precision mechanics, batteries, storage, etc.

In July 2020, Foxconn announced plans to invest up to $1 billion to expand the Sriperumbur plant and create around 6,000 jobs. The announcement came amid the US-China trade war as Apple looked for facilities away from Beijing.

As of now, Foxconn makes smartphones for Apple, Xiaomi, and HMD, EV components for Aether Energy and Ola Electric, televisions for Vu, hearables for Boat and telecom and networking products for ZTE in India through its three manufacturing units.

Besides, Foxconn Group is also partnering with Vedanta Group to set up semiconductor manufacturing in India. It is a beneficiary of the PLI scheme, which is aimed at boosting manufacturing in the country.

Last year, the company said it will start the assembly of the iPhone 12 in its Tamil Nadu plant that already makes older models, marking the first time the flagship device has been made outside of China.

The company looks to cut its exposure to Beijing amid rising labor costs and the impact of the US-China trade war.

Apple contracts all iPhone manufacturing to three Taiwanese companies: Foxconn, which trades as Hon Hai Precision Industry; Pegatron, and Wistron. They make about 200 million units a year, with Foxconn accounting for roughly 60% of the total.

Foxconn Tamil Nadu Plant Controversy

In December last year, protests erupted outside Foxconn’s Sriperumbudur plant after more than 250 workers were hospitalised after food poisoning.

Almost two weeks after a food-poisoning incident, Apple said it has put the unit on “probation” because its hostels did not meet the American tech giant’s compliance norms.

After Apple’s statement, Foxconn apologized to its employees and then announced to restructure its local management.

“We are very sorry for the issue our employees experienced and are taking immediate steps to enhance the facilities and services we provide at the remote dormitory accommodations,” said a statement by Foxconn Technology Group.

“We are also restructuring our local management team and our management systems to ensure we can achieve and maintain the high standards that are needed.”

Foxconn-Vedanta Chip Manufacturing Unit

The importance of Foxconn for India can be gauged from the fact that it is set to be a key player in the government’s plan to make the country a semiconductor hub.  

In April this year, Vedanta chairman Anil Agarwal said the company in partnership with Foxconn will set up a semiconductor manufacturing plant in the next two years.

Vedanta was the first company to make the announcement to invest in semiconductor manufacturing after the government announced a Rs 76,000-crore programme to boost the electronic chip and display ecosystem in the country.

Vedanta is planning to invest around $15 billion in a phase-wise manner over the next 5-10 years to build displays and semiconductor chips in India.

This is also the company's second attempt to enter the semiconductor space after its earlier plan to set up a display unit with about Rs 60,000 crore investment could not take off.

According to the memorandum of understanding earlier signed between the two companies, Vedanta will hold the majority equity in JV, while Foxconn will be the minority shareholder. Vedanta's chairman will be the chairman of the joint venture.

The semiconductor push is a part of PM Modi's "Make in India" project. The Indian semiconductor market, worth $15 billion in 2020, is estimated to reach $63 billion by 2026, the government said.

Currently, the world's chip market is dominated by manufacturers in Taiwan, the United States, China, and a few other countries and India is sensing a big opportunity.

Foxconn's plan to enter the EV manufacturing business

Besides electronics, Foxconn is also looking at making electric vehicles in India. The Tamil Nadu government has already invited the company to further invest in the state.

Besides, the company's chief also met a delegation from Maharashtra and discussed its investment plans in semiconductor and consumer electronics segments. For this, Pune has emerged as the most natural choice for Foxconn.

Earlier in 2020, Foxconn's deal with Maharashtra government could not be carried out owing to its internal dispute with Apple Inc, the state government had said.

Maharashtra Industries Minister Subhash Desai announced the deal with Foxconn Technology Group to build an electronics manufacturing plant had been cancelled.

He said Foxconn had decided not to go ahead with its commitment to invest around $5 billion (over Rs 35,000 crore) in the State as proposed in an MoU signed with the government in 2015.

However, with the company's fresh plans to make EVs, India is sensing a big opportunity and states are opening their doors for investments.

Electric vehicles are a relatively new segment for Foxconn. Last year, it bought a factory in the US to produce electric vehicles for the North American market and will also use the plant to contract-manufacture for customers like hybrid EV brand Fisker.

Foxconn also plans to build an EV manufacturing facility in Thailand by 2023 to serve Southeast Asian markets.

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