In a move which signals that it would relocate a major chunk of its electronic manufacturing facilities to India, Taiwanese contract manufacturer Foxconn said on Monday that its new plant in Karnataka will look at producing mechanical/ precision machinery, electric vehicles, IC design and semiconductors.
The plans were disclosed in a letter from the company’s chairman, Young Liu, to Karnataka chief minister Basavaraj Bommai. They also dispel confusion resulting from a Foxconn statement over the weekend that its investment plans for the state — on a 300-acre plot in Bengaluru — have not been finalised yet.
Analysts said the letter indicates that it is looking beyond manufacturing for Apple in the country by creating an electronic manufacturing cluster. Foxconn currently manufactures iPhones in Tamil Nadu under the production-linked incentive scheme.
“It was great to note the infrastructure readiness timelines, the government of Karnataka’s support for skilling and talent acquisition and the availability of social infrastructure around the region where the plot is earmarked for the project,” Liu said.
In addition to Karnataka, Foxconn said it is committed to set up a manufacturing facility in Kongara Kalan in Telangana, a state government statement said on Monday.
This also clears doubts raised in certain sections that the company was in a dilemma whether to set up the manufacturing facility in Telangana or not, the statement added.
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Liu and his team met Telangana chief minister K Chandrasekhar Rao and other ministers and senior officials last week. Two days later, they met Bommai and other Karnataka ministers and officials.
The new factories in Karnataka and Telangana will each create 100,000 jobs. Though investment figures have not been disclosed by either the company or the respective state governments, industry circles have pegged it at around $700 million, which could go up to $1 billion.
The setting up of new manufacturing plants in India by Foxconn would further strengthen the production base of electronic items in the country. A move in this direction was made with the government’s production-linked incentive scheme for smartphones, which kicked off in August 2020.
Apart from Foxconn, two other contract manufacturers of Apple, Pegatron in Tamil Nadu and Wistron in Karnataka, currently make iPhones under the PLI scheme.
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Under the PLI scheme, smartphone exports from India have crossed the Rs 60,000-crore mark during April-December of the current fiscal. This is 100% higher than exports during the same period last year and 33% higher than the Rs 45,000 crore shipments during the entire FY22. Apple has contributed nearly 50% of the Rs 60,000-crore exports so far.
Projections are that exports for the full FY23 will cross the Rs 75,000-crore mark.
The smartphone scheme was the first and the largest of the 14 PLI schemes announced by the government, which has allocated an outlay of `40,995 crore towards it. This is nearly 20% of the total `2 trillion across all 14 PLI schemes.
Smartphone exports constituted approximately 35% of the total electronics exports of $15.1 billion during FY22. By contrast, in the first nine months of the current fiscal, smartphone exports constitute nearly 45% of the total electronics exports of $16.7 billion.
According to India Cellular and Electronics Association, the industry association of mobile manufacturers, smartphone exports will contribute close to 50% of the total electronics exports at the end of the current financial year.
Industry estimates are that mobile manufacturing will contribute nearly 40% of the $300 billion electronics manufacturing by 2026 and nearly 50% of the $120 billion exports. At the end of the current fiscal, electronics exports are expected to reach closer to $20 billion and mobile exports will likely cross $9 billion.