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."
Write to Sean McLain at sean.mclain@wsj.com
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