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Taiwan’s Foxconn to Pour in $5 Billion in Factories, R&D in India

| Aug 10, 2015 10:14 PM EDT

Founder and chairman of Foxconn Technology Terry Gou with Maharashtra Chief Minister Devendra Fadnavis at an MoU signing ceremony in Mumbai on Saturday, July 8.

Taiwanese electronics manufacturer Foxconn will be investing $5 billion to build factories and fund research and development in the western state of Maharashtra, according to an Indian state official.

Subash Desai, Maharashtra's industries minister, made the announcement after Foxconn, the world's largest contract electronics manufacturer by revenue, signed a memorandum of understanding on Saturday, Aug. 8, with Maharashtra to invest the money for its operations that would employ 50,000 people.

Foxconn said in a statement that the agreement "outlines significant investments that Foxconn intends to make in the next five years."

The company, known officially as Hon Hai Precision Industry Co., manufactures products that include 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 its factories," Desai said.

According to the report, the signing of the deal would boost Indian Prime Minister Narendra Modi's efforts to strengthen India's manufacturing base, generate jobs and reduce the country's reliance on imports.

The Wall Streel Journal said that Modi hopes to increase India's manufacturing output to 25 percent of gross domestic product (GDP) by 2022, an increase of around 18 percent.

In comparison to India, World Bank data shows that manufacturing represents 31 percent of China's GDP. The Indian government expects that a manufacturing boom will help generate millions of new jobs.

The report added that India's manufacturing sector is prevented from growing by bureaucratic red tape, unpredictable tax rules and labor laws that make it difficult to fire workers.

While selling its handset business to Microsoft Corp. last year, Nokia Corp. was slapped with a multi-million-dollar tax bill, forcing the company to shut down manufacturing at its phone manufacturing plant in India, one of its largest. Earlier this year, Foxconn also closed down a factory that built phone parts for the Nokia plant.

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.

During this week's meeting between Terry Gou, Foxconn's CEO, with government ministers and PM Modi, the CEO said that he wanted Foxconn to do more in India than simply assemble phones and other electronic devices.

This means that the company's multi-billion-dollar investment would be a test, as it had wanted to diversify its manufacturing base away from China, where rising tax bills and employee wages have become an issue.

Desai said that Foxconn plans to construct 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," Desai said. "In the next six months everything will be clear."

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