It is just after 9 a.m. in a village outside the big coastal city of Chennai in southeastern India. In the living room of one of the village’s brick houses, a portrait of Ganesha, a symbol of prosperity and good fortune, is displayed on a lemon-yellow wall. Next to the widely worshipped Hindu deity with an elephant head, appearing completely out of place, is an Apple logo. 

“It’s because I love my company,” Sanjay (a pseudonym) says in explaining the logo to a CommonWealth reporter.

Though this 25-year-old professes his admiration for Apple, he is not an employee of Apple. Instead, he works on an iPhone assembly line for Foxconn Hon Hai Technology India Mega Development, the Indian subsidiary of one of Apple’s biggest contractors, Taiwan-based Hon Hai Precision Industry Co.

As Sanjay’s mother serves a traditional southern Indian breakfast of idli, a savory rice cake, and chicken curry, she tells her visitors from Taiwan, “I’m very proud to tell others that my son works for Hon Hai.”

(Source: Pei-Yin Hsieh)

Escaping poverty through manufacturing

Sanjay, who has a high school education, goes to work every day at Hon Hai’s factory in an industrial park in Sriperumbudur, about 40 kilometers southwest of downtown Chennai.

Foxconn, Samsung, and other foreign companies use shuttle buses to transport employees. (Source: Pei-Yin Hsieh)

The local rural industrial structure changed after foreign companies stationed the industrial park in south India. (Source: Pei-Yin Hsieh)

He joined the company three years ago and is his family’s main income earner, supporting his parents, who are farmers, and his younger brother, who is still in school. His monthly salary of under US$330 for his work on the iPhone line enables his family to live a middle-class lifestyle by Indian standards, embodying the goal of Prime Minister Narendra Modi’s “Made in India” policy. 

In 2014, when Modi was elected prime minister for the first time, he dreamed of employing hundreds of millions of young Indian citizens in the manufacturing sector and fully capitalizing on his country’s emerging demographic dividend. India’s population will overtake China’s this year, enabling it to challenge China as the “world’s factory.” 

Hon Hai’s production of iPhones in India is also the result of pressure from Apple CEO Tim Cook, who has asked the company’s suppliers to diversify to India to strengthen the resilience of Apple’s supply chain.

According to the Economist, Apple has sought the shift primarily because of geopolitics and increasingly strained U.S.-China relations that have made it more awkward for the company to do business in China.

Piyush Goyal, India’s minister of commerce and industry, said at a business conference in January that Apple hoped to expand its manufacturing in India from the current 5-7 percent of its total output to up to 25 percent. His view was consistent with a JP Morgan Chase & Co. report published in 2022 that projected Apple would manufacture 25 percent of all iPhones in India by 2025. 

The epicenter of this latest, large-scale seismic shift in the global electronics industry supply chain is the industrial cluster found along the 300-kilometer stretch in southern India separating the important industrial city of Chennai, dubbed “India’s Shenzhen,” in the state of Tamil Nadu and Bengaluru (Bangalore) in the state of Karnataka.  

Known as the Chennai-Bengaluru Industrial Corridor (CBIC), the area represents one of India’s five biggest industrial clusters.  

Apple’s supply chain nerve center: National Highway 48 

To take a closer look at this emerging supply chain, the CommonWealth team followed National Highway 48 (which runs between Chennai and Bengaluru and continues as far north as Delhi) west out of Chennai and saw a roadway similar to the freeway connecting Shenzhen and Guangzhou in a highly industrialized part of southern China.

During the visit, three major Taiwanese contract manufacturers for Apple in industrial parks located along or not far from NH 48 were busy recruiting workers and expanding capacity to get ready for the iPhone 15, expected to be unveiled in September.

“This will be the first time that India manufactures the newest iPhone in step with China,” said an executive with an Apple contractor. Inside the factory, iPhone 15 production lines have taken shape, and are expected to churn out the new handsets in the second half of the year.

“It will be the largest-scale manufacturing of the iPhone in India in history,” the executive said.

The Hon Hai factory complex, covering more than 100 acres and the first stop on the team’s tour, was once Hon Hai’s contract manufacturing center for Nokia products but was converted in 2019 to focus exclusively on assembling iPhones.

The team then traveled about an hour from NH 48 southeast to Mahindra World City, operated by one of India’s biggest automotive groups. The complex is a privately run industrial park complete with a residential area, hospital, shopping mall and even a train station.

The Pegatron plant in Mahindra World City produces the newest iPhone. (Source: Pei-Yin Hsieh)

It is also home to the second biggest iPhone assembler, the Taiwan-based Pegatron, which leased BMW’s old factory there and began manufacturing in September 2022. Pegatron is currently training 10,000 assembly workers there to produce the newest iPhone.   

Pegatron is also interested in buying a nearby 30-acre lot to expand capacity so it can meet Apple’s requirements in the future, according to industry insiders.

Following the stop at Pegatron, the team headed west again for several hours before reaching the factory complex of Taiwan-based Wistron Corp. just east of Bengaluru in the southeastern corner of the state of Karnataka. In 2019, it become the first plant in India to assemble iPhones, and when the CommonWealth team was there, the water and electricity systems were being installed in a new plant that had just been completed. 

Encouraged by Apple, components makers have also been exploring India as a production base.

Over the past six months, several smartphone component vendors have sought out Jason Chung (鍾宏駿), vice president of the Indian subsidiary of Taiwanese manufacturing engineering company Transdien Engineering. He said makers of batteries, touch components and lenses are among those who have looked at land and talked to him about setting up a factory.

“They all say they are in India at the request of their customers,” Chung said. “They have the same goal of wanting to be in commercial production by 2024,” he added, believing that pressure from Apple will be the key in whether upstream suppliers end up in India in the near future.

(Source: Pei-Yin Hsieh)

Cook: Focus on Indian market

Beyond geopolitical issues, Cook’s urgency has a practical side: India is the world’s second biggest smartphone market and growing rapidly.

Apple is expected to open its first Apple Store in India as early as in the first quarter, even though its iPhone is far beyond the means of the majority of Indians. An iPhone 14 Pro Max costs US$2300, and a Tata automobile can be had for the same price as just two of those high-end phones.

Yet Apple had record revenues for a single quarter in India in the fourth quarter of 2022, posting double-digit growth, while sales in China were falling because of COVID-19 restrictions that hampered consumer spending.

With Apple seemingly eager to go all in, how will Hon Hai meet Apple’s requirements? 

(Source: AP)

Replicating the Apple City model

The answer lies on NH 48. The Tamil Nadu state government is currently supporting the construction of a huge dormitory housing complex that is a 15-minute drive from the Hon Hai factory. Once completed, the village of 10-story edifices will be able to accommodate around 20,000 people in all. 

“And Foxconn has sort of signed up with us to actually occupy most of it. They will occupy almost the entire facility,” confirmed Thiru Krishnan, the head of Tamil Nadu’s Industries, Investment Promotion and Commerce Department. 

Krishnan expected workers to come both alone or with their families from within the state or outside the state. 

Employee dormitories are building to meet Apple's manufacturing needs in the future. (Source: Pei-Yin Hsieh)

“We are organizing water and things on a fairly large scale. It’s a whole mini-town. They need shops, restaurants, recreation, social infrastructure, schools, everything,” he said.

Hon Hai also has access to land adjacent to its factory where company dormitories are going up, something that is a rarity in southern India. It’s “the first company here to build such a big dormitory,” Krishnan said.

These housing initiatives suggest an attempt by Hon Hai to replicate its “Apple City” experience in Shenzhen and Zhengzhou in China, with tens of thousands of workers coming from towns hundreds if not thousands of miles away and working, living, and shopping in the complex. 

Attractive subsidy program

Hon Hai’s “Apple City” model has benefited from Modi’s “production linked incentive scheme” (PLI) for large-scale electronics manufacturing, a cash-subsidy program focused on the production of mobile phones and specific electronic components.

The scheme pays a rebate of 4 percent to 6 percent on incremental sales over those of a base year for goods manufactured in India for five years after the base year. The incentive is particularly attractive to bigger companies, with Indian electronic manufacturing services giant Dixon Technologies, Hon Hai, Pegatron and others in the Apple supply chain all applying to expand their presences and capacity. Hon Hai’s venture in India, for example, received US$45 million in subsidies through the PLI scheme in 2021.

Is ‘Made in India’ truly competitive?

As much as Apple is driving a shift to India, can products made there actually compete with “Made in China?” 

A Taiwanese manager in the Apple supply chain who has set up factories in both China and India said India has some advantages. Wages for production line workers are about one-fifth of those paid in China, and as Indian factories have stepped up training and developed more skilled workers in the past two years, yield rates have shot up, narrowing the productivity gap between the two countries to below 2 percent, from 10 percent previously.

That emerging competitiveness has fueled the rise of a large Indian business conglomerate’s manufacturing interests in the sector.

At a large facility southeast of Bengaluru, Tata Electronics has begun producing the notoriously hard-to-make metal casing for the iPhone and shipping parts to Hon Hai for assembly, even if the yield rate remains relatively low.

The Tata Group is also expected to buy Wistron’s iPhone assembly line near Bengaluru, apparently by taking a majority stake in a joint venture with the Taiwanese company.

(Source: Pei-Yin Hsieh)

Infrastructure still lacking

Even the main complaint of Taiwanese companies investing in India in the past, an intractable and unpredictable bureaucracy, may also be improving. To make government work more efficiently, Tamil Nadu has set up a single window portal that enables investors to electronically file applications and secure approvals related to new businesses. 

Pooja Kulkarni, who heads Guidance Tamil Nadu, the state’s investment promotion agency, visited Taiwan in November 2022 soon after Taiwan lifted its COVID-19 quarantine restrictions for arriving travelers. She stressed one-stop management and the single contact portal to help businesses, especially foreign enterprises, conveniently invest in and set up factories in the state.  

Transdien’s Chung said it has typically taken nine to 12 months from the time Taiwanese investors decided to invest to getting a government permit to buy land and build a factory in an industrial park, but “that has now been reduced by at least a third,” he said. 

Stiff challenges remain, however.

One executive in the Apple supply chain in southern India said that in Tamil Nadu, where the Apple supply chain is concentrated, water supply and wastewater treatment remain problems, and industrial parks are not currently equipped to handle rapid manufacturing growth.

In addition, the Indian government is trying to encourage joint ventures between overseas and local enterprises, but as one executive with a Taiwanese Apple supplier said, negotiating with local companies can be an excruciating process.

Still, Richard Lee (李詩欽), the chairman of the Taiwan Electrical and Electronic Manufacturers’ Association, visited five states in southern India where Taiwanese manufacturers are concentrated in November 2022 and felt the tide is changing.

The general feeling in the past, he said, was that China was developing rapidly while India was lagging far behind.

Last year, however, when India celebrated the 75th anniversary of Indian independence, it declared a goal to create a US$400 billion electronics manufacturing ecosystem by 2025. 

“Whether or not India can hit the target remains to be seen,” he said, “but I think they are rearing to go.” 

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Translated by Luke Sabatier
Uploaded by Ian Huang