Land, power and skill: Inside the high-stakes battle to build the next Foxconn City

All of them worked at a mobile phone manufacturing facility at Sriperumbudur run by Foxconn, the world’s largest contract electronics maker and one of Apple’s primary suppliers. The hostel was also run by a Foxconn group company.

The incident led to protests about poor living conditions. As many as 12-15 people were packed in a 150 sq. ft room. Shared toilets were unclean, factory workers had told Mint. The plant, which was predominantly making iPhone 12 and iPhone 13 back then, shut down for a few days.

The protests were a wake-up call for the company as well as the state government. Over the next many months, they got their act together.

In August this year, a massive industrial housing complex at Vallam Vadagal, near Sriperumbudur, spread over 20 acres and costing ₹706 crore, was inaugurated by M.K. Stalin, Tamil Nadu’s chief minister. He was accompanied by Young Liu, the chairman of Hon Hai Technology Group (Foxconn).

The complex was built by the State Industries Development Corporation and today houses 18,720 women who work at the mobile phone production facility. In time, it could become India’s first ‘Foxconn City’, a model popular in China. Foxconn has established large campuses in China that not only run plants but are also living spaces. There house residential facilities, recreational areas, hospitals and schools. Since large-scale factories are typically located outside urban areas, these campuses promise better quality of life for workers during their off-hours.

“This is a key aspect of Foxconn’s commitment to employee welfare. The development of these Foxconn campuses relies heavily on the company’s own investments but also necessitates collaboration with government agencies and other societal institutions," Ivan Lam, an analyst at Counterpoint Research, who is based in Hong Kong, said.

The Tamil Nadu government and other state governments appear more than willing to collaborate. At present, Foxconn runs operations in three Indian states—apart from Tamil Nadu, there is Andhra Pradesh and Karnataka. Factories in these states assemble everything from smartphones and telecom equipment to television, displays and electric vehicle components.

Foxconn learnt a hard lesson during the covid-19 pandemic—one of its key Chinese factories shut down due to an outbreak leading to supply issues for Apple which could not meet consumer demand in 2022. China’s zero-covid policy, coupled with geopolitical factors, such as border tensions between India and China and US tariffs on Chinese imports, have forced the Taiwanese manufacturer to turn to India.

In an interview to CNBC last year, Young Liu said that India could account for upto 20-30% of Hon Hai’s manufacturing and sales over the next 10 years. Currently, India generates about 3% of the group’s global revenue. In 2023, Foxconn globally totalled $192 billion in revenue; its five Indian subsidiaries generated revenue of ₹45,309 crore in 2022-23, or about $6 billion.

Which states will capture Foxconn’s future investment? Four southern states are competing for its attention. Before we tell you more, here’s a brief history of the Taiwanese giant’s operations in India.

iPhone rush

Foxconn is nearly two decades old in India. It first set up operations in 2006 as a supplier to Nokia, which ran its mobile phone-making facility in Sriperumbudur.

While the Nokia facility closed in 2014 because of two crippling tax disputes, Foxconn continued to operate and grow in India. It set up Rising Stars Mobile India in 2015 at Sri City in Andhra Pradesh to cater to the country’s growing smartphone manufacturing opportunity. The Indian government had a new narrative to push manufacturing by then—‘Make in India’. Tariffs were subsequently imposed on the imports of fully made smartphones, making local assembly more attractive.

Foxconn next opened Bharat FIH to cater to growing demand from companies like Xiaomi. Bharat FIH, in fact, was planning a public listing. The ₹5,000 crore initial public offering (IPO), planned in 2021, was shelved. Industry watchers said it was because the company hadn’t diversified beyond its first customer, Xiaomi. The concentration risk would have alarmed investors.

A former executive at Foxconn, who didn’t want to be identified, told Mint that the company had plans to set up 10-12 manufacturing units in 2015-16, almost aping the production lines the group operated in China. Terry Gou, its former chairman, had also visited India and committed a $5 billion investment in Maharashtra. An iPhone assembly unit was being planned in Navi Mumbai. The plans never fructified. If it did, it would have changed the electronic manufacturing landscape in the state by now.

Instead, in 2016, the Apple supplier started assembling iPhones from its Sriperumbudur facility near Chennai and continues to do so. iPhone 16 Pro and Pro Max, Apple’s latest models, were manufactured at the plant before its commercial launch earlier this year, Bloomberg reported.

State vs state

“We will do what is needed," T.R.B. Rajaa, minister for industries, investment promotion and commerce, government of Tamil Nadu, told Mint.

After Vallam Vadagal, Foxconn has sought a large parcel of land near its Sriperumbudur facility to build a second industrial township. The state, clearly, doesn’t want to miss an opportunity to create more employment.

Here’s an instance of one-upmanship: On the day the worker housing facility was inaugurated, minister Rajaa drove the Foxconn chairman from Chennai airport to Vallam Vadagal, a distance of 38 km, in his Range Rover.

“Tamil Nadu government ensures that investors who come to the state have enough land and the necessary infrastructure. The industrial housing complex is a step in that direction," Rajaa said. “Foxconn has been with us for a long time. Apart from the incentives the state offers, they expect proper infrastructure, most importantly redundancy in power and a strong talent supply," he added.

Tamil Nadu has been pursuing a policy of creating multiple electronics manufacturing clusters across the state rather than locating them in one area. Apart from Sriperumbudur, it is creating a cluster near Tiruchirappalli where Jabel Inc, an American electronics major, will set up a production facility. Coimbatore, the minister said, will focus on electronics and semiconductor design. Madurai, meanwhile, is being prepped to house large global capability centres.

“Unlike other states, Tamil Nadu is more evenly developed. We have multiple ports and international airports across the state. There are top-quality educational institutions in every district producing skilled workers. It makes sense to create multiple clusters," Rajaa said. This strategy will help investors, too, as workers staying closer to home don’t change jobs often, he added.

Tamil Nadu, like we mentioned earlier, isn’t the only state that’s vying for Foxconn’s attention. While Raja’s pitch appears compelling, so is Karnataka’s.

Foxconn has already committed to an investment of $1.7 billion in Bengaluru for a plant that would make 20 million iPhones one day.

Priyank Kharge, minister for information technology in the Karnataka state government, told Mint that while infrastructure was being equally pitched by all states, Karnataka’s offer includes something others don’t have in abundance: a large skilled workforce. Over the last many decades, Karnataka, particularly Bengaluru, has evolved as India’s tech hub, that is now a magnet for talent from across India. Apart from technology companies, the state also has sizable investments in manufacturing.

“The scale of the city they proposed is huge. So, it’s just not about giving them land subsidies. It is about giving them talent, giving them the civic communities, and ensuring that we provide the right environment for their quick growth—because they’re used to scaling up very quickly, like in China," the minister said. “It’s not going to be easy but the only ones who are equipped to do that are us."

Karnataka has pitched a hub-and-spoke model to Foxconn—Bengaluru as the hub and satellite cities as spoke. Satellite cities can offer infrastructure specific to an industry, for instance, electronics or pharma. A 300 acres supplier park has also been discussed.

The state, Liu stated in a press statement, is key to its ambitions of advancing its mobile phone assembly and electric vehicle component projects.

The Andhra Pradesh government, meanwhile, has offered 2,500 acres to Foxconn to set up an industrial park, media reports have stated.

The fourth state competing for investments is Telangana, which is offering 2,000 acre at an unidentified location for the famed ‘Foxconn City’. In May 2023, Foxconn broke ground for a $550 million facility at Kongara Kalan in the state’s Rangareddy district. Here, the company will begin making Apple AirPods this year.

Foxconn Interconnect Technology Ltd (FIT), a Foxconn arm, is setting up the Apple accessories plant, while Chang Yi Interconnect Technology (India) Pvt Ltd, a subsidiary, is implementing the project. Trial production has already begun, state government officials who didn’t want to be identified said.

The only north Indian state in the Taiwanese group’s radar is Uttar Pradesh. In January this year, HCL Group and Foxconn announced a joint venture to establish an outsourced assembly and testing unit for semiconductors. Foxconn holds a 40% equity stake and is expected to invest $37.2 million in the joint venture. The Economic Times reported in September that the unit is likely to come up in Uttar Pradesh, for which the Yamuna Expressway Industrial Development Authority, a state agency, has allocated approximately 30 acres.

Foxconn didn’t respond to Mint’s request for clarifications.

Jobs and more

So, why are Indian states competing for Foxconn’s investment?

The contract manufacturer’s scale implies huge employment. “Manufacturing, particularly electronics manufacturing, remains a labour-intensive industry, with a high volume of personnel moving within factory campuses," Counterpoint’s Lam said. “Foxconn in China, for instance. At its peak, a single campus could employ over 300,000 workers. This necessitates the management of extremely large-scale systems, as the campus must not only fulfil production requirements but also cater to the daily lives," he added.

Indian states believe that Foxconn and its suppliers can mop up semi-skilled workers, especially women. Interestingly, India is the only country where the number of Foxconn’s female employees is higher than male workers, as per the group’s 2023 Sustainability Report. That year, Foxconn employed 9,110 women and 2,132 men full-time. In addition, it employed 35,718 women and 1,196 men indirectly.

Of course, states are also competing to climb up the manufacturing value chain—from assembly operations to making components. The industrial township that Foxconn is seeking will help India develop a strong component ecosystem.

“Foxconn wants to bring in 50 or 60 Taiwanese component suppliers, who are part of its vendor network, into India. It wants to house all of them in one place," a Tamil Nadu government official, who didn’t want to be identified, said.

Another senior executive who represents a global supply chain company said that while the state government’s cooperation is crucial, policy predictability from the central government is equally warranted. That doesn’t appear to be a concern right now with India wanting to capitalize on the China+1 trend. In fact, Foxconn chairman Liu was awarded the Padma Bhushan, India’s third highest civilian honour, in July 2024. Liu is the only foreigner to receive the award.

Foxconn, meanwhile, is confident its India business can scale. “After visiting so many states in India I felt that India is ascending. Foxconn wants to be a part of it. We will grow together with India’s growth," Liu told reporters at Vallam Vadagal.