Contract Manufacturer Foxconn Confirms US$5 Billion Investment in India – What are the Implications?

Foxconn, a key player in the global electronics contract manufacturing industry, has committed a US$5 billion investment to set up manufacturing facilities in the Indian state of Maharashtra, and potentially other locations as time goes by. Foxconn is best known for manufacturing iPhones and iPads for Apple Inc. The multibillion dollar investment pledge by Foxconn is making the news for several reasons.

For one, this announcement gives a massive lift to Indian Prime Minister Narendra Modi’s ‘Make in India’ program. Two, Foxconn’s decision to set up multiple facilities will translate to as many as 50,000 new jobs in the Indian state of Maharashtra over the next few years. Three, other companies in the electronics industry could draw inspiration and confidence from Foxconn’s move and consider India as a contract manufacturing base.

Although Foxconn is currently hogging the headlines by putting to rest rumors that were rife for a few months now, Finnish company Nokia deserves some credit for India’s developing image as a contract manufacturing hub. Nokia set a precedent of sorts by investing substantially in India (in Tamil Nadu) a decade ago to manufacture mobile phones on a large scale. With this, Nokia sent a message to the world: It was possible to make high-quality electronics in India while enjoying an economical advantage.

In the meanwhile, Foxconn’s investment will have a positive ripple effect thanks to its decision to get its suppliers to every location where its facility will come up. Market analysts expect a cluster effect to result from this sort of an arrangement – much like the automotive cluster that has taken firm root in western Maharashtra already. 

Foxconn’s entry into India comes at an opportune moment – the country is perfectly positioned not only to supply Indian-made electronics globally, but its domestic smartphone consumption has also grown by leaps and bounds. From the creation of new jobs to attracting more similar investments, it seems likely that if things go as planned, Foxconn’s entry into India could prove to be a historic business move.