Foxconn Looks to India--and Beyond China--for iPhone Assembly
January 22 2019 - 5:29AM
Dow Jones News
Apple Inc.'s largest iPhone assembler, Foxconn Technology Group,
is considering producing the devices in India, people familiar with
the matter said, a move that could reduce Apple's dependence on
China for manufacturing and potentially for sales.
Executives at Foxconn, a contract manufacturer that assembles a
large portion of the world's iPhones in China, are studying whether
to include an India project in budget plans, one of the people
said. Senior executives, possibly including chairman Terry Gou,
plan to visit India after next month's Lunar New Year to discuss
plans, the people familiar said.
Foxconn's look at India comes as sustained friction between
Washington and Beijing over trade and technology is pushing many
companies to consider diversifying their supply chains away from
China, a global center of assembly for smartphones, computers and
other electronics.
Apple currently manufactures most of its iPhones in China
through Foxconn, a Taiwan-based company formally known as Hon Hai
Precision Industry Co., as well as via other contract
manufacturers. That business model, along with a sizable reliance
on sales in China, has made Apple vulnerable to rising U.S.-China
tensions over trade and geopolitical rivalry.
Foxconn said in a statement it doesn't comment on current or
potential customers or any of their products. An Apple spokesman in
India declined to comment.
As difficulties in the China market grow, India is attracting
the world's tech companies, both for its potential as a
manufacturing base and for its huge emerging market of 1.3 billion
consumers. Only about a quarter of Indian consumers own
smartphones, according to research company eMarketer. Apple has
struggled to crack the Indian market, with its already small market
share dropping last year to about 1% from about 2% in 2017.
Apple has so far built mostly lower-end models in India. Wistron
Corp., another Taiwanese contract manufacturer, began assembling
the SE model, then Apple's cheapest, in the southern state of
Karnataka in 2017. Those were the first iPhones made in India, and
Wistron has since started assembling the 6S model there as
well.
Foxconn is currently considering producing higher end, pricier
iPhones in India, including models with organic light-emitting
diode, or OLED, displays, the people familiar said.
The relatively high price of iPhones compared with those of
other brands has hampered Apple in the Indian market, analysts say.
Manufacturing its high-end iPhones in India could help lower prices
by allowing Apple to avoid a tariff that adds 20% to devices
imported from China.
An expanding business in India could also offer Apple a
potentially huge alternative to China, the world's largest
smartphone market. Apple is grappling with weaker-than-expected
demand for its iPhones. Lackluster China sales of iPhones in part
contributed to Mr. Cook this month announcing Apple's first cut in
revenue guidance since he took the helm in 2011.
Foxconn has facilities in India and produces devices there for
companies such as Chinese smartphone maker Xiaomi Corp. While it
has produced iPhones elsewhere, including Brazil, Foxconn currently
relies on China to produce the devices on a large scale.
Indian media reported late last year that Foxconn would begin
production of various models of the iPhone in the country.
In looking to expand production beyond China, Foxconn has been
studying Vietnam as well as India, the people familiar said. It is
leaning toward India because of the market's growth potential,
these people said.
On the negative side, the people said, Indian workers aren't as
skilled in precision manufacturing as their Chinese counterparts
and India's infrastructure lags behind China's, the people said. In
addition, they said, India will have to do more to develop its
smartphone supply chain to compete with China, where Beijing and
local governments have worked to move factories up the value
chain.
Yang Jie and Yoko Kubota in Beijing, Newley Purnell and Rajesh
Roy in New Delhi
(END) Dow Jones Newswires
January 22, 2019 05:14 ET (10:14 GMT)
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