As labour costs rise in China, Apple supplier Foxconn doubling down on India with US$5 billion investment

PUBLISHED : Monday, 10 August, 2015, 2:29pm
UPDATED : Monday, 10 August, 2015, 2:29pm

As Chinese and western smartphone makers and other tech firms target India's growing middle class, Foxconn – the world's biggest contract electronics maker – is due to invest as much as US$5 billion in Maharashtra state.

Foxconn's operations in the state will employ more than 50,000 people, Maharashtra industry minister Subash Desai told the Times of India.

The investment will be the largest of its kind in the state and will also help boost prime minister Narendra Modi's "Make in India" campaign, which aims to turn the sub-continent into a manufacturing powerhouse.

READ MORE: Foxconn’s Foxbot army close to hitting the Chinese market, on track to meet 30 per cent automation target

Other foreign firms are also investing in the country, South Korean steelmaker Posco previously committed over US$12 billion to build a plant in Odisha state, while Chinese device maker Huawei recently got approval to begin manufacturing in India.

Foxconn is also in talks with other states to set up manufacturing units and forge possible partnerships in the world's fastest growing smartphone market, the report said.

Maharashtra and Foxconn officials signed a memorandumw of understanding outlining the deal over the weekend, Foxconn said in a statement.

The Taiwanese firm said it has significant plans for India, which it sees as a key part of its "Industry 4.0" smart manufacturing plan.

Foxconn's India expansion comes as labour costs in mainland China, where it has long based the bulk of its operations, are on the rise.

This trend has sparked concern in China. In an editorial highlighting the number of manufacturers moving their business overseas, influential daily China Business News asked if India was on the way to replacing China as the "world's factory".

The Modi administration has made it a goal to increase India's manufacturing output to 25 per cent of gross domestic product by 2022, up from around 18 per cent today. Manufacturing makes up 31 per cent of China's GDP, according to the World Bank.

With labour costs on the rise, some Chinese business leaders have held up automation as the solution.

China has been the world's largest industrial robot market for a number of years, with domestic sales surging 54.6 per cent from 2014 to reach 57,000 units, according to China National Radio. Over 70 per cent of robots sold in mainland China last year were imported.

Provincial authorities in manufacturing stronghold Guangdong, which is pursuing a major automation push, said earlier this year that they will spend more than 943 billion yuan (US$152 billion) by 2018 to replace human workers with robots.

The three largest cities in the province – Guangzhou, Shenzhen and Dongguan – have begun handing out annual subsidies of between 200 and 500 million yuan to manufacturers who install robots on assembly lines.

Foxconn, which still employs over one million workers in mainland China, said last month that it hoped to have at least 30 per cent automation in its Chinese factories by 2020.