The Taiwanese company Hon Hai Precision Industry, better known as Foxconn, has signed an agreement with the government of India for the construction of a new factory, which will manufacture the iPhone. Information about the project appeared in the Indian business newspaper the Economic Times.
Authorities in the Indian state of Maharashtra signed an agreement with Foxconn that invest $10 billion in the plant and the development of research and development. The factory will cover an area of about 5 sq. km was Initially considered other regions, but in the end the choice was stopped on the third largest state in India whose capital is Mumbai. The factory should start production of the iPhone 18 months after signing all the necessary papers.
If these plans are realized, this will be an important achievement of Prime Minister of India Narendra modi, seeking to accelerate the country’s industrial development and creation of jobs and reduce the country’s dependence on imports. Modi plans by 2022 to bring the production volume up to 25% of the national GDP. Now the figure is 18%. For comparison: in China, it is, according to the world Bank, equal to 31%. Indian authorities hope that the development of production will create millions of jobs.
However, this process is constrained by several negative factors. Investors deterred by numerous bureaucratic obstacles, unpredictable changes in tax legislation and too strict laws do not allow employers to dismiss employees. In 2014, Finland’s Nokia has shut down its Indian plant for the production of the phones, which was one of its largest enterprises. Caused billions of dollars in taxes that Nokia had to pay in India in the process of selling your business producing Microsoft phones. In 2015, Foxconn has closed a factory in India, producing components for smartphones Nokia.
The current investment project, Foxconn will greatly increase the size of foreign investments in economy of India. Over the past 15 years the volume of direct foreign investments in the Indian electronics industry amounted to only $1.5 billion.
The Taiwanese company has long been seeking to expand its production base, moving it outside of China, where taxes and salaries are constantly growing. So far she’s not too successful. Foxconn is known primarily as the manufacturer of the iPhone, tried to move part of the production of these smartphones to Brazil, but the attempt was unsuccessful. Due to the high personnel and logistics costs Brazilian iPhone cost almost twice as much made in the USA.
At Foxconn there is another billion-dollar investment project, have not yet brought the impact. In 2014, the GOU signed an agreement to build a plant in Indonesia. The project will last for several years, but Foxconn management already reported about serious problems in its implementation, including very high cost of land and uncertainty over taxes. In India the company is waiting for the same problems. To reduce costs, Foxconn is planning to automate production processes and thereby reduce the demand for labor.
