Foxconn Bets Big on India: Plans $1.54 Billion Investment to Tap Fast-Growing Tech Manufacturing Market

Taiwanese electronics giant Foxconn has announced plans to invest $1.54 billion in India, marking its latest and largest foray yet into the rapidly growing South Asian technology manufacturing hub.

The proposed investment, disclosed via a stock exchange filing, will be utilized to fulfill Foxconn’s “operational needs” as it continues expanding its production footprint beyond China. This announcement comes just two months after Foxconn unveiled intentions to double its workforce and investment levels in India within a year.

India has increasingly emerged as a preferred destination for technology companies looking to diversify their manufacturing bases beyond China. With excellent human capital, a huge domestic market, and government incentives for local production, the country is an attractive option for firms adopting a “China+1” strategy.

Foxconn is the world’s biggest electronics manufacturing services (EMS) provider and assembles devices for major clients including Apple, Amazon, and Sony. It already operates three manufacturing campuses in India across the states of Andhra Pradesh and Tamil Nadu.

Ramping Up India Bets After Exiting Troubled Chip JV

The company’s latest investment decision is indicative of its undeterred focus on India despite its shock withdrawal from a $19.5 billion semiconductor joint venture (JV) with Indian metals-to-oil conglomerate Vedanta earlier this year.

The JV was poised to be India’s largest-ever foreign direct investment project for setting up chip fabrication units in Prime Minister Narendra Modi’s home state of Gujarat. However, Foxconn pulled out just five months after signing a memorandum of understanding with Vedanta, citing a lack of infrastructure and human resources to support the sophisticated chipmaking process.

At the time, Foxconn reiterated its confidence in India’s electronics manufacturing goals and desire to contribute to the government’s marquee “Make in India” initiative launched in 2014. Echoing similar sentiments again, the company said:

“Building fabs from scratch in a new geography is a challenge, but Foxconn is committed to invest in India. We have been working on challenges like this since the 1980s. Foxconn has no intention to do anything but continue to strongly support the government’s ‘Make in India’ ambitions and establish a diversity of local partnerships that meet the needs of stakeholders.”

$600 Million Investments in iPhone Component Plant

Putting its money where its mouth is, the Taiwanese manufacturing giant in August disclosed plans to invest $600 million in two projects in India’s southern Karnataka state.

One project, entailing a $353 million investment, will involve setting up a plant to manufacture iPhone component parts and casing accessories. The other is aimed at establishing a facility to produce semiconductors and electronics parts, with Foxconn allocating $247 million.

Production at both plants is expected to commence between late 2023 to early 2024. The new expansion will create over 75,000 direct and indirect jobs while catering to both domestic and export needs for Foxconn’s international clientele.

India Revenues Surging Amid Global Economic Uncertainty

Foxconn’s emphasis on India comes even as technology spending has taken a hit globally amid surging inflation, rising interest rates, and fears of an impending economic downturn. However, the company has witnessed Indian revenues grow 53% year-over-year in the first nine months of 2023.

According to analysts at Goldman Sachs, Foxconn generated $8.3 billion in Indian revenues during this period—a significant jump from $5.4 billion in the whole of 2021-22. Consequently, the country’s contribution to the manufacturing giant’s topline has swelled to 3.3% so far this year compared to around 2% in the previous fiscal year.

As the analysts further highlighted:

“The rising contribution reflects global-tier clients’ needs on a diversified production base, and we see Hon Hai’s global footprints as better securing its leading market position in EMS.”

India Expected to Lead Next Wave of Tech Hardware Growth

Beyond stable long-term demand fundamentals underpinned by domestic consumption, India is forecasted to catalyze the next leg of growth for electronics hardware production as global firms seek alternatives to China.

India cellphone exports surged a mammoth 183% year-over-year to reach $8.4 billion in April-November 2022. Meanwhile, computer hardware exports expanded 57% to $2.4 billion over the same timeframe.

The government now aims to grow India’s technology hardware manufacturing sector from $75 billion to $300 billion by 2026 under the Production Linked Incentive (PLI) scheme for IT hardware.

Having already seen India emerge as its second largest smartphone producer after China, Foxconn is primed to capitalize on the country’s expanding technology production upside—evidently clear from its proposed $1.5y4 billion latest investment.