Foxconn Technology Group, Apple’s biggest contractor, plans to invest $700 million in a new plant in India to diversify its supply chain out of China, according to Bloomberg.
The Taiwanese manufacturing giant’s new plant will be situated on a 300-acre site near Bengaluru, the capital of the southern Indian state of Karnataka. Sources said Foxconn would assemble iPhones and might even produce parts for its electric vehicle business, entirely separate from Apple.
“The investment is one of Foxconn’s biggest single outlays to date in India and underscores how China’s at risk of losing its status as the world’s largest producer of consumer electronics,” Bloomberg said.
Behind the scenes, Apple might be pressuring its suppliers to reevaluate its manufacturing supply chain of iPhones, AirPods, HomePods, and MacBooks in China. Apple’s supplier of Airpods, GoerTek, said earlier this week it’s investing $280 million in a new production facility in Vietnam and considering an India expansion.
“Starting from last month, so many people from the client side are visiting us almost every day,” GoerTek Deputy Chairman Kazuyoshi Yoshinaga told Bloomberg. He said the topic that dominates client discussions is “When can you move out” of China?
Shifting supply chains out of China has been dubbed as “friendshoring.” While that’s a play on “offshoring,” this isn’t about companies moving operations back to the US or Europe but instead seeking foreign alternatives that retain the benefit of cheap labor costs but with less international controversy.
A recent poll by the American Chamber of Commerce in Shanghai, an organization that promotes US businesses in China, said about a fifth of the 307 companies surveyed revealed a reduction in investments in the world’s second-largest economy.
The uncertainty around China started in 2018 after President Trump launched a trade war. Then supply chain snarls at manufacturing facilities during Covid spooked many multinationals with high exposure in the country. And now, rising Sino-US tensions have fueled the fire to push companies to diversify abroad.
Readers have been well aware of this trend over the last year:
Michael Every, the global strategist at Rabobank, expects India to be one of the largest beneficiaries of friendshoring.
We doubt CEO Tim Cook will ever mention plans to divest from China because that could heavily impact Apple’s entire ecosystem centered in China… Don’t upset Beijing.
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