Foxconn Could Make India Its Next Manufacturing Base

Foxconn, the world’s largest contract electronics manufacturer, has signed a $5 billion deal to set up R&D and hi-tech manufacturing facilities in western India within the next five years. The $5 billion pledge is the largest foreign investment into India’s tech manufacturing sector and a boost for thegovernment’s “Make in India” program designed to spur domestic manufacturing. The Taiwan-based firm, which manufactures for a host of global device brands like Apple, BlackBerry, Amazon, Motorola, Xiaomi and Sony, has the bulk of its factories in China.

Separately on Monday, leading Chinese smartphone maker Xiaomi announcedthat it will now manufacture its devices in India in partnership with Foxconn. The factory will be based in the southern state of Andhra Pradesh.

Going by the recent spate of announcements, Foxconn is becoming one of the most aggressive foreign investors into India. Last month, the company announced that it would inject $20 billion into India’s solar sector along with Japan’s SoftBank and India’s own telecom firm, Bharti. Reports suggested that another Foxconn joint venture with billionaire Gautam Adani’s Adani Groupcould focus on making iPhones and iPads.

Also, Foxconn has rumoredly allocated billions of dollars for India’s e-commerce and technology startups, and is said to be close to finalizing a $500 million investment into online retailer, Snapdeal.

Setting up manufacturing centers in India could be Foxconn’s attempt to build an alternative to its manufacturing base in China where a slowing domestic market and rising wages total up to a tough environment. Foxconn said it intends to set up 10-12 plants and employ a million workers in India by 2020.

The $5 billion weekend announcement came as Foxconn chairman Terry Gousigned a deal on Saturday with Devendra Fadnavis, the chief minister of Maharashtra (of which India’s financial center Mumbai is the capital) to base its first facility in that state. Foxconn will set up its factories in 1,500 acres of land allotted near Pune and will start scouting centers in other regions. In its first center, Foxconn will assemble components, start automation and testing labs and manufacture key components for smartphones, smart TVs and computers.

Foxconn is no stranger to India. The device maker which was manufacturing Nokia devices in India closed its facility in the southern city of Chennai in end 2014 after Nokia decided to stop making its phones in the country. It officially shut down the factory earlier this year. For Foxconn, the second time is challenging too as it will have to contend with India’s infrastructure shortcomings and logistics challenges.