Apple’s top Taiwan-based iPhone producer Foxconn has teamed up with Xiaomi, a major Chinese smartphone manufacturer, in a $5 billion deal to build assembly plants in Maharashtra, India.
Xiaomi unveiled its first “Made in India” phone Monday after entering the country last year in an attempt to corner one of world’s fastest growing smartphone markets amid India’s economic surge.
The company’s partnership with Foxconn — the world’s biggest electronics manufacturer — is part of a large-scale effort to cut rising labor costs in China but could also mean the migration of issues surrounding worker safety and wages.
Indian Prime Minister Narendra Modi launched a campaign to encourage international companies to invest in the country’s economy. “This is the best news yet for Modi’s ‘Make in India’ initiative aimed at getting manufacturing up as a share of India’s economic output,” Singh said. “India’s economy is about 18 percent manufacturing. It should grow to 25 percent or more. In theory, with that amount of cash going into 5 factories, this would mean tens of thousands of decent paying jobs for India.”
“Foxconn’s costs in Taiwan and mainland China are going up and it needs to diversify to keep costs down. Manufacturing in India may be a good way to do that,” said Vikram Singh, vice president for international policy and national security for the Center of American Progress, which helps fund ThinkProgress.
Indians are expected to buy $400 billion in electronics by 2020, with smartphone, TV, and computer purchases exceeding the country’s imported oil consumption, the Wall Street Journal reported. Moreover, the country recently doubled its tax on mobile devices to 12.5 percent, a move that encouraged device manufacturers to explore local more cost-effective solutions.
Despite the massive Foxconn-Xiaomi investment and India’s growing digital appetite, up to 12 factories set to be completed by 2020 may not immediately or smoothly come to fruition. Foxconn’s chairman Terry Gou said in a press conference earlier this month the companies haven’t yet settled on locations for the plants: “India is a big, big country. Too many places, too many states, too many cities. The choice is difficult,” the Wall Street Journal reported.
Additionally, Singh pointed out, the companies may encounter viscid legal battles that could slow progress: “Building factories in India is not like building factories in China. Think long legal battles over property rights and local demands as well as infrastructure challenges.”
Once established, however, the Foxconn and Xiaomi and their American-based tech company clients will have to be diligent to make sure the manufacturers’ labor problems don’t persist. Tech companies have a complex history with workers’ rights in the U.S. and abroad. A Foxconn assembly line worker died last week after jumping from a building, following a string of worker deaths.
Samsung also pledged $86 million to workers who develop illnesses as a result of their employment. Foxconn, and Apple by association, has also been linked to poor working conditions where employees were exhausted, hungry, overworked, and often underage during peak iPhone production. Apple previously vowed to improve working conditions in its contractors’ factories, including eliminating conflict minerals from it’s supply chain, but hasn’t confirmed whether its devices would be manufactured in India.
“Labor problems could certainly be a major issue that Foxconn customers — Apple, Samsung, etc. — need to be vigilant about,” Singh said. “But I expect that state leaders in Maharastra will not want controversy or scandals and will expect Foxconn to meet International Labour Organization standards. I think it’s something that Indian authorities should pay close attention to.”