Foxconn Plans to Spend $5 Billion on Factories in India’s Maharashtra State
Taiwanese electronics manufacturer signs MOU as a ‘first step,’ says state government official
NEW DELHI—Taiwanese electronics manufacturer Foxconn plans to spend $5 billion dollars on factories, and research and development in the western Indian state of Maharashtra, according to a state official.
Foxconn, the world’s largest contract electronics manufacturer by revenue, signed a memorandum of understanding Saturday with Maharashtra to invest the money in coming years on operations that would employ 50,000 people, said Subash Desai,Maharashtra’s industries minister.
The agreement “outlines significant investments that Foxconn intends to make in the next five years,” Foxconn said in a statement. The company—known officially as Hon Hai Precision Industry Co.—makes products including Apple Inc. iPhones, Xiaomi Corp. smartphones and Samsung Electronics Co. tablets.
“The memorandum of understanding is the first step. They are in the process of selecting the locations” for the factories, Mr. Desai said.
If the plans are realized, the deal would give a boost to Indian Prime Minister Narendra Modi’s efforts to bolster India’s manufacturing base, generate jobs and reduce the country’s reliance on imports.
Mr. Modi’s goal is to increase India’s manufacturing output to 25% of gross domestic product by 2022, up from around 18% now. By way of comparison, manufacturing represents 31% of China’s GDP, according to the latest figures from the World Bank. The Indian government hopes a manufacturing boom will help generate millions of new jobs.
Investors say that bureaucratic red tape, unpredictable tax rules and labor laws that make it difficult to fire workers have prevented India’s manufacturing sector from growing.
Last year, Nokia Corp. shut down manufacturing at its phone manufacturing plant in India, one of its largest, after the company was hit with a multi-billion-dollar tax bill while it was in the process of selling its handset business to Microsoft Corp. Foxconn shut down a factory that built phone parts for the Nokia plant earlier this year.
Foxconn’s investment would be a shot in the arm, more than tripling the $1.5 billion in direct foreign investment the Indian electronics industry has received in the past 15 years.
The company’s CEO, Terry Gou, was in the Indian capital during the week meeting government ministers and Mr. Modi. At a news conference on Tuesday he said that he wanted Foxconn to do more in India than simply assemble phones and other electronic devices.
The multibillion-dollar investment would represent a big bet for the company, which has long wanted to diversify its manufacturing base away from China, where it faces rising tax bills and employee wages.
So far those efforts have had mixed results. The company is best known as an assembler of iPhones, but an attempt to move part of those operations to Brazil has proved largely unsuccessful. Handsets from the Brazil factory cost nearly twice as much as they do in the U.S., because of high labor and logistics costs.
Foxconn has made billion-dollar investment promises before that have failed to materialize. In 2014, Mr. Gou signed an agreement to spend a billion dollars over several years to build a factory in Indonesia, which has yet to happen. Foxconn has cited issues with high land prices and concerns about taxation, both of which are problems in India as well.
Foxconn also says that it wants to increase the amount of robots on its assembly lines to cut its costs, possibly reducing the number of human jobs these new factories will generate.
Mr. Desai, the Maharashtra government official, said Foxconn is leaning toward building factories in the industrial towns of Khopoli and Talegaon, east of Mumbai. “They have not clarified, as yet, the choice of locations and the choice of products” to be manufactured, Mr. Desai said. “In the next six months everything will be clear.”