Foxconn, the assembler for Apple iPhones, has established India as its second home after China. Recently, the company purchased a 300-acre site in Bengaluru, and plans to set up a plant in Telangana. It has also partnered with the Vedanta group to manufacture semiconductor fabs. However, one development that is particularly significant in the Indian context is its founder Terry Gou’s second attempt to become Taiwan’s president.

Speculations are that if he’s elected, Taiwan’s ties with China would be strong considering his closeness to China. Established in 1974 in Taiwan, Hon Hai is the world’s largest electronics manufacturer and leading technological solutions provider. In 2022, its revenue stood at $220 billion.

Since 2019, Foxconn has been manufacturing Apple handsets in India at its plant in Sriperumbudur. Two other Taiwanese suppliers, Wistron and Pegatron, also manufacture and assemble Apple devices in India.

businessline spoke to Peter Bendor-Samuel, CEO, Everest Group, a global research firm, whether Gou’s running for Presidency could impact Taiwanese companies, including Foxconn, in India? Excerpts:

Excerpts:

Q

If Foxconn’s founder Terry Gou wins Taiwan’s presidency, speculations are that Foxconn and other Taiwanese companies will look at China only. What’s your view?

The factors which are driving the ongoing steady decoupling of manufacturing from China are well beyond the personal preferences of an individual. The US, and to a lesser degree, its European allies are increasingly concerned about an over-dependence on China. Hence Foxconn’s clients are insisting on the decoupling or at least a diversification. This secular trend is well underway and is only strengthening as the superpowers adjust to the rise of China.

India is the next best location for much of this work, given its large domestic market, educated workforce, and growing logistical capabilities. It is the clients that are driving this secular trend and these clients are taking their cues from the US and EU political sentiment and regulations. This is a train which has left the station and is picking up speed.

Q

How long will it take for India to move closer to China?

The diversification will happen over 5 to 10 years, and India will be a major beneficiary, regardless of the leadership in Taiwan. It is best for everyone concerned that Taiwan could walk a very delicate line in being friendly to China yet allowing a gradual diversification. In that regard, Hon Hai’s relationships may prove helpful; however, it will not stop the diversification or slow it. The forces driving this are well beyond the control of any one person’s preferences or relationships.

Q

How is India’s mobile phone industry in terms of quality compared with China?

China is much ahead in that they have a large, trained workforce and a huge vendor base. These advantages will take a decade or more of investment to bring India up to par. However, the investments have already begun, and the forces driving the need to diversity make the investments and journey well worth the time, money, and effort.

Q

What should India do to scale to match China?

India can help in several ways, including assisting with securing property so the factories and logistics can be built and continuing to clear the way by removing difficult legislation and over regulation

Q

There are reports that Apple is reducing its dependency on Foxconn and giving more orders to Pegatron and Wistron. What’s your view?

Apple is clearly over concentrated both in China and with Foxconn. That said, it is a long and expensive journey to diversify. The increased investment in Pegatron and Wistron are steps to accelerate this diversification. However, this is likely to take years and be a bumpy ride as the economies of scale and strong ecosystem support that both Foxconn and China enjoy are not easily or quickly duplicated. We can expect that Apple will persist in this diversification as the long-term price and risk of its current dependency comes more and more into focus.

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