Foxconn’s India Strategy Explained

Hon Hai Precision Industry, better known as Foxconn became a darling of the Indian media as well as policymakers when it made a slew of announcements over moving more of their contract manufacturing for Apple to our shores. Though their hyped semiconductor deal with Vedanta may not have hit the high notes, the company was seen as a harbinger of manufacturing outsourcing that would help India replace China in this cost-competitive market.

However, a small article published in DigiTimes Asia and attributed to Taiwan’s Central News Agency tells us why the company decided to make the shift. Foxconn has launched a new business group in Zhengzhou (China), the same place where its iPhone assembly plant is located. And this entity will focus on AI and electric vehicles – two deep-tech industries. 

Smartphones are passe, EVs and AI servers in focus

According to the published report, Foxconn’s Chinese business group would focus on artificial intelligence (AI), electric vehicles (EV) battery replacement, energy storage, intelligent robotics and other business-critical areas. Small wonder then that they decided to move all the grunt work to India so that space and resources get freed up. 

The new entity is wholly owned by Hongfujin Precision Industry (Zhengzhou) and has a registered capital of a billion Chinese Yuan, which roughly translates to $138.6 million. Close to a month ago, Foxconn Chairman Liu Young-way told shareholders that the company would look to expand its EV battery supply chain beyond Taiwan to the US, Indonesia and India. 

Foxconn had started this move some time ago

Just so that readers are away, Foxconn had bought an old General Motors plant at Lordstown in Ohio and hired a former Nissan executive Jun Seki to lead its EV expansion drive with the sole aim to capture the market in pretty much the same way that it did with contract manufacturing Apple products. 

During the same earnings call, Liu had also highlighted the company’s focus on the AI market stating that with more people using ChatGPT, the market for AI servers would rise much faster. “We expect the second half of 2023 to see a three-digit spike,” he said, adding that the Taiwanese tech giant has a 40% global market share for servers at present. 

Foxconn has challenges, will India solve them?

Of course, there are issues that the company is facing, both with its EV venture as well as the much-hyped greenfield chip-making facility in India. Lordstown Motors, in which Foxconn had invested over $50 million, has filed for bankruptcy protection and put itself up for sale over a dispute related to promised investment from the Taiwanese company. 

In the case of its deal with Vedanta, the government confirmed that the joint venture had resubmitted an application for a silicon fabrication plant in the 40nm node technology framework. Readers would recall that last year they had applied for a 28 nm node initially but with Foxconn coming in, they seem to have expanded their horizons. 

Chinese investments in chip-making are streets ahead

While this would be a first-of-its-kind plant in India when it comes up, China has aggressively gone ahead with investments in the semiconductor industry. A recent report estimated that more than $290 billion has been pumped into 742 projects across 25 Chinese provinces and regions during 2021-22 alone. Of these a third was for semiconductor equipment and material. 

The 742 projects covered various semiconductor-related investments, including panel displays, wafer foundry, storage devices, integrated device manufacturing (IDM), device/chips, platform/base, semiconductor equipment, semiconductor materials, packaging and testing. And Foxconn also happens to be one of those involved in this program. 

For the moment, the Taiwanese tech giant seems to be hedging its bets in a way whereby it is moving all the operations that could generate labor arbitrage to India while continuing to place its bets on the Chinese government to facilitate investments in next-gen technology products and solutions.