Foxconn, the world's largest contract electronics manufacturer, is set to create nearly a million jobs by setting up between 10 and 12 manufacturing units in India by 2020, according to various media reports.
India has attracted relatively little interest from global manufacturers, which makes the news about Foxconn Electronics Inc. intriguing. But there are a number of reasons why the company might be looking to India as a manufacturing hub.
Most important is the Indian government's newfound show of support for the manufacturing industry. Backed by Prime Minister Narender Modi, the "Make In India" initiative -- an important part of the broader Digital India program -- is specifically aimed at attracting investment from manufacturers and provides incentives to that end. Thanks to Make in India, Foxconn is already in contact with the state governments of Andhra Pradesh, Gujarat and Maharashtra.
Moreover, India may be on the verge of a consumer electronics boom. With Reliance Jio set to launch 4G services later this year, and other service providers also focusing on 3G and 4G technologies, there is likely to be enormous demand for smartphones in the months ahead. A manufacturing presence in India would allow Foxconn to meet local demand for electronic goods. According to reports, the company has already said it will manufacture devices in India on behalf of Xiaomi, a Chinese smartphone developer, and it is also believed to be in talks with Gionee, a rival Chinese firm. Foxconn could also look to make products through agreements with Indian players such as Micromax Informatics Ltd. and Lava International Ltd. .
In addition, a manufacturing presence in India will make it easier for Foxconn to address other sectors, such as defense. Indeed, besides manufacturing facilities, Foxconn is also planning to set up data centers and incubators in the cities of Delhi, Mumbai, Bengaluru and Hyderabad, as well as to invest in Indian startups and device companies.
Foxconn's previous experiences in India are hardly encouraging. The company was forced to shut down a factory in Chennai last year after Nokia Corp. (NYSE: NOK), its only client in the country, closed some of its own facilities. This marks something of a contrast with China, where Foxconn maintains as many as 12 factories and makes Apple Inc. (Nasdaq: AAPL)'s iPad and iPhone devices, among other products.
Yet economic growth in China has been slowing, while wages have been going up. India, conversely, is still known for its cheap labor. When coupled with the government's manufacturing push, that could make it a perfect destination for Foxconn.
No doubt, the company's plans are extremely significant for India as it looks to attract global manufacturers. If Foxconn can make a success of its next foray into the Indian market, it may well inspire other players to consider India in their plans.
— Gagandeep Kaur, contributing editor, special to Light Reading