India's appeal wanes? Foxconn returns to develop new businesses
2024-08-10
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[Global Times reporter Yuan Jirong] In recent years, as low-end manufacturing has been transferred to developing countries in Southeast Asia and South Asia, Taiwan's electronics assembly company Foxconn, as a giant in the Apple mobile phone industry chain (fruit chain), has also invested in building some industrial chains in India, Vietnam and other places. However, this trend has changed recently. Foxconn's parent company Hon Hai Technology Group announced that Foxconn will invest in the construction of a new business headquarters building in Zhengzhou with a total investment of about 1 billion yuan. Foxconn will accelerate the implementation of projects such as new energy vehicle complete vehicles, energy storage batteries, digital medical and robot industry bases.
Increase investment in Zhengzhou
At the end of 2019, Hon Hai officially laid out the next stage of growth momentum, among which the three major future industries are "electric vehicles, digital health, and robots", and the three core technologies are "artificial intelligence, semiconductors, and next-generation communications". Hon Hai recently stated that around the implementation of the "3+3" strategy, Foxconn will focus on the layout of new energy vehicle trial production centers, solid-state batteries and other projects in the Zhengzhou Airport Economic Comprehensive Experimental Zone in the future.
Previously, Foxconn, represented by the "Apple supply chain" manufacturing industry, focused its investment and construction expansion on India. With its help, Apple began to produce the iPhone SE in India in 2017. Since then, it has continued to expand its manufacturing business in India, assembling models such as the iPhone 13 and iPhone 14. The iPhone 15 and iPhone 15 Plus were manufactured and put on sale in India from the day they were released globally.
However, according to a report by Hong Kong's Asia Weekly on the 5th, Foxconn's mobile phone industry chain ushered in a "recruitment peak season" in mainland China. It is reported that the iPhone 16 series will still be assembled in mainland China. Against this background, from the end of June to the beginning of July, Shenzhen Guanlan Foxconn accelerated its recruitment. There are also media reports that Zhengzhou Foxconn has a large number of new employees in July.
Yan Xiaoxiao, chairman of Sanfu Engineering India Private Limited, which provides supporting services for Chinese mobile phone companies in India, told the Global Times that this time Apple allowed most of the iPhone 16 OEM business to return to mainland China, mainly due to insufficient production capacity in India. It is reported that many parts of Foxconn have also been transferred back to the mainland China supply chain for procurement, which has caused some supply chain manufacturers that originally planned to move their factories to India to reconsider their investment direction. At present, electronic OEM factories in mainland China such as BYD and Luxshare Precision have joined the iPhone 16 supply chain and become Apple's latest OEM partners. In addition, due to the recent yield rate of iPhone OEM in Indian factories is only about 50%, and there are still problems with hygiene management (exceeding the standard of E. coli), the product has caused some troubles when it is exported to both Europe and mainland China, affecting market sales. Therefore, Apple decided to respond with price cuts and promotions.
Is India’s “Apple chain” no longer popular?
Yan Xiaoxiao told the Global Times that her company was one of the first mobile phone supply chain companies to move its business to India. In Yan Xiaoxiao's view, Foxconn has been adjusting its global production layout and making "multilateral bets" in recent years. The current increase in investment in China is mainly due to the unsatisfactory performance of the iPhone production line in India.
Yan Xiaoxiao believes that Foxconn's investment in Zhengzhou is a landmark event. This shows that Foxconn still values the mainland market's perfect infrastructure, huge market capacity and continuously improving manufacturing level. In the future, the mainland will still be one of Foxconn's major investment markets. It also shows that there is still a big gap between the quality of India's supply chain and China's.
In his opinion, first of all, although India's labor costs are relatively low, the quality and technical level of workers are difficult to compare with China. Indian workers often take leave and are absent from work at will, and the illiteracy rate is also very high. Secondly, India's business environment has brought great challenges to Foxconn's production and operation. In 2023, Wistron, an important iPhone supplier, withdrew from the Indian market. In addition to the reasons for its own business adjustments, it is also related to the Indian market environment.
Smartphone assembly line in India. (AFP)
Reuters reported at the end of July that Foxconn's Indian factories systematically excluded married Indian women from working. For this reason, Indian labor officials also went to a Foxconn factory in southern India to question factory executives about the company's employment policy, but Foxconn denied this.
Apple is also reportedly facing pressure from the Competition Commission of India (CCI). In a June 14 report, the CCI said, "The Apple App Store is an inevitable trading partner for app developers. As a result, app developers have no choice but to comply with Apple's unfair terms, including the mandatory use of Apple's proprietary billing and payment systems." Reuters said that the CCI has been investigating Apple, believing that Apple uses its dominant position in the iOS operating system app store market to force developers to use its proprietary in-app purchase system.
The New York Times recently reported that nearly 10 years after Indian Prime Minister Narendra Modi promoted the "Make in India" plan, the share of manufacturing in India's economy has remained stagnant at about 16%, even slightly lower than when Modi came to power in 2014. India's labor force is growing at an accelerated rate, but turning this demographic advantage into an actual advantage means making Indian workers more efficient.
In addition to the various challenges in employment, the incomplete supply chain is also an issue that Apple cannot ignore when investing in India. Many iPhone parts for Indian factories still have to be imported from China, and the factories have to pay expensive transportation costs for a long time. Last year, the iPhone 15 series frequently had product quality problems and was returned by customers, so it had to take price cuts, forcing Apple CEO Tim Cook to go to China in person to reorganize the supply chain layout. In addition, India's infrastructure and supply chain construction are far less perfect than China. During the peak period of power production in factories, they face the dilemma of power rationing, and the phenomenon of electricity theft among the Indian people is also widespread.
Xiang Ligang, chairman of the Zhongguancun Information Consumption Alliance, told the Global Times on the 8th that Foxconn will expand its recruitment in the mainland and increase its investment in the mainland to form greater production capacity in order to produce the iPhone 16. This proves to a large extent that China's manufacturing capacity is a strong comprehensive capacity formed by efficiency, talents, and industrial supporting facilities, which cannot be moved away just by moving away.
New energy, new business
In 2023, Foxconn announced plans to invest NT$25 billion (about RMB 5.543 billion) in the next three years to build new manufacturing facilities in Kaohsiung, including factories producing electric buses and electric vehicle batteries, to further support its electric vehicle goals. Foxconn is not only seeking to diversify its revenue base, but also embarking on a layout in the electric vehicle market to achieve its ambitions.
Xiang Ligang believes that in addition to assembling consumer electronics, Foxconn is also pursuing success in new energy technologies. If it wants to make a difference in the field of electric vehicles and batteries, it will have to face fierce competition from mainland companies. Foxconn will face relatively large challenges.
Fu Yuwu, honorary chairman of the China Society of Automotive Engineers, said in an interview with the Global Times on the 8th that China's automobile industry is currently developing in the direction of intelligence and electrification, and has the world's largest new energy vehicle industry chain and the richest application scenarios. Foxconn chose to set up its new business headquarters in Henan, on the one hand because it has a large industrial base in the local area; on the other hand, it may have taken a fancy to the new energy vehicle industry chain here.
Fu Yuwu told reporters that Foxconn has launched its electric bus brand MODEL T, and Henan has a relatively complete electric vehicle industry cluster. BYD, CATL and other leading companies in the battery industry chain have invested and set up factories in Zhengzhou and Luoyang respectively. Dongfeng, SAIC, Chery, Nissan and other car companies also have production bases in Henan, as well as large bus manufacturers such as Yutong. In the future, Foxconn will have a better industrial foundation to develop the "3+3" new business in Henan.
However, industry insiders also told the Global Times that Foxconn has not given up its investment in India. India's Digital Times reported on the 5th that according to industry sources, Foxconn is expanding its production capacity in India and building more production lines.
Indian financial media Moneycontrol recently reported that people familiar with the matter revealed that Apple will assemble the high-end Pro and Pro Max models of the iPhone 16 series in India for the first time. According to the "Economic Survey 2023-2024" released on July 22, Apple assembled $14 billion worth of iPhones in India in the last fiscal year, accounting for 14% of total production. India also hopes that Apple will be able to produce its full range of products, including laptops and desktops, locally in the next few years.
Yan Xiaoxiao believes that India has a large young population, its consumption capacity is gradually increasing, its labor costs are relatively low, and its industrial chain and supply chain are gradually improving. This is why India is attractive to Foxconn.
