Mass production of iPhones set to start in India

India has become the fastest-growing smartphone market in the world, while China stagnates and Apple loses share to local competitors such as Huawei Technologies and Xiaomi.

Foxconn Technology Group chairman Terry Gou said the iPhone will go into mass production in India this year. (Reuters File Photo)

Foxconn Technology Group chairman Terry Gou said the iPhone will go into mass production in India this year, a shift for the largest assembler of Apple's handsets that has long concentrated production in China.

Gou said that Prime Minister Narendra Modi has invited him to India as his Taiwanese company plans its expansion in the country. Apple has had older phones produced at a plant in Bengaluru for several years, but now will expand manufacturing to more recent models. Bloomberg News reported this month that Foxconn is ready to start trial production of the latest iPhones in the country before it starts full-scale assembly at its factory outside Chennai.

"In the future, we will play a very important role in India's smartphone industry," Gou said at an event in Taiwan. "We have moved our production lines there."

India has become the fastest-growing smartphone market in the world, while China stagnates and Apple loses share to local competitors such as Huawei Technologies and Xiaomi. Apple has been a minor player in India, in part because of its high prices, but local manufacturing would help the Cupertino, California-based company avoid import duties of 20%.

"For Foxconn, the China market for iPhones is saturated, and labour costs are three times higher compared with India," said Karn Chauhan, a Gurugram-based analyst at Counterpoint Research. "India is still an emerging smartphone market, it has a lot of potential domestically and could serve as an export hub for the region."

It's not yet clear how Apple's steps into India will affect its China operations. China has been the company's most important manufacturing base for years, home to Foxconn's biggest facilities and hundreds of other partners. Foxconn already has two assembly sites in Andhra Pradesh and Tamil Nadu, where it makes devices for Xiaomi and Nokia. Locating more production in India would help diversify Apple and Foxconn's manufacturing footprint away from China amid ongoing trade tensions with the United States.

The Indian assembly line of Foxconn's Hon Hai Precision Industry would serve local and export markets by the time Apple announces its next iPhone models in September, people familiar with the matter have said. Gou said that his company is talking with the government about investment terms. He has a dozen software people in India and he plans to increase that to 600, he said. "We are the primary assembler after all," Gou said on Monday. "If our customer wants to boost its scale, it will need to depend on us to grow the comprehensive supply chain."

Producing phones locally would also help Apple's retail push in India. The company needs to meet a 30% local sourcing rule to be able to open its own stores in the country.