Looks like accelerating wage inflation in China is putting the shine on India’s lower labor costs.
Taiwanese tech manufacturer Foxconn Technology is in talks to manufacture Apple’s iPhone in India, government officials said. If it happens, Apple, Foxconn and Indian Prime Minister Narendra Modi’s government will benefit.
“Foxconn is sending a delegation of their officers to scout for locations in a month’s time,” Subhash Desai, Industries Minister of India’s western state Maharashtra, told Reuters. Desai said Foxconn had yet to make any firm commitment, but he said the group was looking to manufacture iPhones, iPads and iPods, both for domestic as well as global sales.
The move makes sense for Foxconn. With surging wage inflation, China, where Foxconn currently makes iPhones, is no longer the lowest-cost producer in the region. By moving to India, the world’s largest contract maker of electronic products can get cheaper labor and cut transportation costs but putting production sites closer to the Indian consumers.
With competition intensifying, Foxconn needs to lower its costs to keep Apple as a client. Meanwhile, Apple needs to cut the price of its products to grab market share from Samsung Electronics and local players in the world’s No 3 smartphone market.
Foxconn has said it is aiming to develop 10-12 facilities in India, including factories and data centers, by 2020, reported China Daily, but gave no details. On the latest report, the Taiwan-based tech giant declined to comment.
India has the second-highest number of mobile phone accounts behind China. According to networking solutions company Cisco Systems, there will be 650 million smartphones in the country by 2019. The number of tablets will rise 9% to 18.7 million by then.
Foxconn was forced to shut up shop in India last year after its client Nokia closed. Its return would be a big victory for India, which needs to ramp up manufacturing and employment in its tech sector.
Modi’s government is seeking to reboot manufacturing. But India is yet to rival China, particularly in technology. Many plants in the country are still stuck at the screwdriver-assembly level.
Categories: Asia Unhedged