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Thursday, 16 March 2023

 Foxconn to invest $200 million in India for AirPods production, diversifying away from China.

Apple's primary supplier, Foxconn, has reportedly won a contract to manufacture AirPods for the tech giant and is planning to build a factory in India to produce the wireless earphones, according to sources with direct knowledge. This marks the first time Foxconn will become an AirPods supplier and underscores its efforts to diversify its production away from China. Currently, AirPods are made by a range of Chinese suppliers.

Sources have revealed that Foxconn will invest more than $200 million in the new AirPods plant in the southern Indian state of Telangana. However, it is unclear how much the AirPods order is worth. The person who shared this information requested anonymity as the matter was not yet public.

According to the source, Foxconn officials had been debating internally for months about whether to assemble AirPods due to relatively lower profit margins on making the device. Despite initial hesitation, they eventually decided to proceed with the deal to strengthen their relationship with Apple. The source stated that this would increase the likelihood of receiving orders for Apple's new products. 

According to reports, Apple requested that Foxconn establish production facilities in India. The company is competing with other Taiwanese companies like Wistron and Pegatron for more orders from the world's most valuable company. Foxconn Interconnect Technology, a subsidiary of Foxconn, plans to commence construction of a manufacturing facility in Telangana in the latter half of this year and begin production by the end of 2024.

Analysts have previously suggested that Apple has requested suppliers, including Foxconn, to make AirPods in India. However, details such as the investment size, timeline, and which suppliers have manufacturing plans in the country have yet to be disclosed.

Foxconn's decision to diversify its production away from China comes as Apple and its key suppliers seek to avoid a potential hit to business from mounting Sino-US trade friction. Furthermore, the company's giant iPhone factory was disrupted by strict COVID-19 curbs in China last year. Foxconn has announced that it will increase investment in locations beyond China to satisfy customer demand and reduce its dependence on China for production. 

It is still being determined whether Foxconn's production strategy will affect current AirPods providers such as Luxshare Precision. Goertek, another supplier, disclosed in November that one of its foreign customers had requested the suspension of assembly work for an intelligent acoustic product, which analysts then recognized as AirPods Pro 2. The interruption would cause revenues to decrease by up to 3.3 billion yuan (approximately Rs. 4,000 crores).

Overall, Foxconn's decision to build a factory in India to manufacture AirPods marks a significant step in the company's effort to diversify its production away from China. The move also highlights Apple's growing interest in India as a key manufacturing hub. More such developments will likely occur as companies look to navigate the current trade friction and supply chain challenges.

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