In the competition between China and India over the past few years for the title of Asia’s Greatest Economic Prospect, China’s infrastructure, organisation and the good value of its labour force has always tipped the scales in favour of the world’s (still) most populous and (again, still) second-biggest economy.
So it was perhaps a surprise last week to hear the Taiwanese company Hon Hai Technologies, better known as Foxconn, is planning to step up its expansion plans in India. The largest global contract manufacturer of Apple’s iPhone and iPad devices, it plans to build up to 12 new factories and employ as many as one million workers by 2020.
In recent years, manufacturing in China, especially of goods constructed for export, has become a much more expensive proposition. The strengthening yuan has made it a difficult place to make things for sale overseas, although the domestic market has improved.
Labour rights
The workforce has also become more vocal about its labour rights and demands. And the Chinese government is keen to move away from basic manufacturing into something a bit more sophisticated.
This looks like a move of low-end manufacturing from China to India, while seeking to supply companies targeting India’s domestic market, such as Xiaomi, China’s largest smartphone maker.
With this strategy in mind, the focus of the expansion is FIH Mobile, Foxconn’s phone manufacturing unit, which wants multiple manufacturing sites in India, none employing more than 10,000 people. FIH Mobile said we would see the first India-made phone by the end of the year.
Then Xiaomi, FIH’s largest customer, said it had plans to manufacture in India through a partner and will probably make an announcement about its plans in the coming months.
Foxconn gets half its business revenues from Apple, but corporate chief Terry Gou has been visiting India to seek help from prime minister Narendra Modi in transforming the government’s “Make in India, Skill India” programme into something to support his plans. “I am ready, ask your government,” Gou told local media NDTV.
“Which state will make India most friendly for manufacturing – that’s where we will start. There will be at least one million jobs created by 2020, maybe more, and not just basic jobs but jobs for skilled workers and engineers. We want to set up our plant in rural areas and transform the area with jobs and infrastructure.”
Complications
Foxconn first opened a plant in Chennai a decade ago, but there were “complications”, Gou said, linked to the political situation at the time.
Gou has also said the New Delhi government in the past few years was not doing enough to support manufacturing, but India was changing.
“You have software, you have content, you need hardware, and now Modi has made it your goal,” he said, adding that local government had become easier to deal with.
Gou is coy about whether it will shift Apple manufacturing to India. “I don’t care what brands I make here; you ask about Apple, but we will make the products where it makes sense, but we have to look at lot of different factors before deciding what to make.
“But we will work with local brands and help them with design, and manufacture components locally, so that Indian brands can also start to export; right now India does not export.”
He also said a lot needs to be done to boost the infrastructure and resolve bottlenecks, so these changes need to happen before this “social revolution” can take place.
