Taiwan's Foxconn Technology Group has just announced a $500 million investment to expand its operations in India as it seeks to diversify its supply chain after labor unrest in its massive plant in Zhengzhou, China, disrupted manufacturing.
Foxconn is one of the largest electronics contract manufacturers in the world. Its plant in Zhengzhou, known as "iPhone City," has over 300,000 workers making iPhones at its peak manufacturing season during the holidays. Anti-Wuhan coronavirus (COVID-19) lockdown protests crippled this massive assembly plant last month, and Foxconn executives are seeking to prevent these kinds of disruptions from occurring again by cutting its dependency on plants based in China. (Related: Apple speeds up plans to shift production OUT OF CHINA.)
By this time, iPhone City would be full and its more than 300,000 workers would be busy working to meet global demand for Apple products. But the exodus of approximately 100,000 to 120,000 of employees and the violent labor unrest have caused production to plummet.
According to an estimate by Kuo Ming-chi, an analyst at TF International Securities, iPhone City only utilized 20 percent of its full manufacturing capacity in November. The unrest has mostly died down, but iPhone City is still severely undermanned for the holidays, which is why Kuo only expects the plant's utilization rate to rise up to 30 to 40 percent by the end of December.
Foxconn to expand iPhone manufacturing in India
Foxconn's massive cash injection will go to its Indian subsidiary, Hon Hai Technology India Mega Development Private Limited, through Foxconn's Singapore subsidiary, Foxconn Singapore Private Limited. It involved the purchase of over four billion shares of Foxconn stock, according to a filing made by the company on Dec. 8 at the Taiwan Stock Exchange.
Even before Foxconn's latest troubles in China, India was already the world's second-largest market for producing iPhones and other Apple products, albeit far behind China.
J.P. Morgan predicts that around 25 percent of all iPhones in the world will be manufactured in India by 2025. Reuters also reported that Foxconn hopes to quadruple its workforce at its iPhone plant in India over the next two years. This would expand the plant's workforce by 53,000 to 70,000 – a substantial boost, but still far smaller than Foxconn's mega-factory in Zhengzhou.
In addition, Apple and Foxconn are also looking to other South and Southeast Asian markets for their manufacturing needs. Foxconn recently signed a $300 million agreement with a developer in Vietnam to expand a new local plant.
Analysts also project that Vietnam will handle around 20 percent of all iPad and Apple Watch manufacturing and 65 percent of AirPods manufacturing by 2025.
Foxconn also announced a nearly $59 million investment into a subsidiary in the Czech Republic, where the company currently makes screens, smartphones and cloud servers and also runs design, research and development centers.
It is unlikely that Apple will totally cut ties with the Chinese market. Foxconn recently announced a $142 million investment into Foxconn's manufacturing plant in Taiyuan, in China's northern Shanxi province. Foxconn characterized this as a "long-term investment."
It is more likely that Foxconn will diversify its manufacturing footprint exponentially, so that supply chain disruptions like the labor unrest in Zhengzhou will have less of an impact on the company's overall manufacturing utilization.
Foxconn is also attempting to diversify where the semiconductors it needs for its electronics manufacturing come from. It recently signed an agreement with the government of India to develop a $20 billion semiconductor plant in the western region of the country.
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Watch this clip from TruNews discussing how China's lockdown measures crippled the Zhengzhou iPhone factory.
This video is from the TruNews channel on Brighteon.com.
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