Foxconn Likely to Build Another Chip-making Facility in India, But Cannot Renounce Govt Incentives. Why?

Published  March 9, 2023   0
S Staff

Young Liu, the chairman of Foxconn has expressed deep interest in beginning new plants in Karnataka and Telangana

The Taiwan based globe’s largest electronics contract manufacturer Foxconn has shown interest to set-up another semiconductor manufacturing plant in India without any kind of incentives, according to an unnamed government official, claims Mint. Apart from this, it has already associated with Vedanta to set-up a semiconductor plant in the Dholera region in Gujarat. However, the fact cannot be ignored that Foxconn of late is showing a lot of interest in beginning new lines of production units in the country in various locations. 

There are some imperative facts why the global contract manufacturer will not proceed without government incentives for its new chip manufacturing plant. According to an exclusive report of Mint, one is the huge amount of incentives offered to begin chip manufacturing plants in India and globally. For instance, the US government has unleashed a $52 billion incentive package under the CHIPS and Science Act in 2022 for beginning new fabs. With the help of this scheme, the US government has signed Chip 4 Alliance with Taiwan, South Korea and Japan to avert China from leading the semiconductor global race.

The EU, Japan, South Korea, and Taiwan follow the same path of providing ample incentives to set-up chip manufacturing units. China on the other hand is also undertaking various strategies and cash is never a challenge for the country. Media reports have shown that Young Liu, the chairman of Foxconn has met the Prime Minister and various state chief ministers upon his recent visit to India. Liu has expressed deep interest in beginning new plants in Karnataka and Telangana. In fact, its current manufacturing plant in Tamil Nadu’s Hosur where it produces iPhones could be expanded at a large-scale. 

In Vietnam, the company has recently expanded its plant. The situation has changed with the onset of COVID as most of the company wants to shift its supply chains away from China. The closure of Wuhan and the massive shipment disruptions has shown the global company leaders the perils of concentrating on manufacturing in a single country. But, the point is how is China able to handle nearly one-third of all electronics, which is worth $3.4 trillion. Mint has reported that there are three reasons: “a vast, local ecosystem of components that allow for seamless input access, a huge supply of trained manpower, and a logistics network that can handle its gigantic export volumes.”

Although India has a long way to go to develop its domestic components manufacturing, it has a huge supply of skilled manpower at a very reasonable cost. While in China, the volume of intelligent youth workers is not increasing like the past. Therefore, it makes sense for a global giant like Foxconn to expand its production units in various states in India with the assistance from the government.