5 Things to Know about Foxconn’s Overseas Ambitions – WSJ

Foxconn, Apple Inc.’s major assembler, has signed a preliminary deal with India’s Maharashtra state to invest $5 billion in factories and research facilities in coming years. But the company, officially known as Hon Hai Precision Industry Co., has a history of making ambitious statements and floating investment ideas that haven’t materialized. Here are five things to know about Foxconn’s overseas ambitions.

Deutsch: Foxconn Logo

Deutsch: Foxconn Logo (Photo credit: Wikipedia)

1 India isn’t its first billion-dollar bet

In 2011, Foxconn agreed to invest $12 billion in Brazil to create a new supply chain that it had hoped will generate jobs. But four years later, Foxconn’s investment in Brazil has been much smaller than the pledged amount. It is still struggling to improve the manufacturing operations at its plants for iPhones and iPads there citing its inefficient labor force. The company has also been in talks for a new plant investment in Indonesia for years.  The Indonesian government once said that Foxconn would invest up to $10 billion, but plans remain in limbo due to political snags.

2 Why India?

While China remains the world’s largest smartphone market by shipments, India has the biggest growth potential for the next 5 years, says Bernstein analyst Mark Li. India recently raised taxes on mobile phones imported to the country to 12.5% from 6%, spurring global handset makers to look at ways to manufacture devices locally.

3 Sign of shift in manufacturing to India from China?

Analysts say it is unlikely that India will overtake China to become the company’s main production base in the next few years as China has an well-established supply chain ecosystem. India still lacks good infrastructure and favorable tax and labor policies, making it a less attractive destination for tech manufacturing.

4 Foxconn Chairman Terry Gou always aims for the best deal

The agreement with the Indian government is non-binding. Foxconn Chairman Terry Gou usually gives a rosy picture about the company’s potential investments when he negotiates with government officials. But only a few investment plans materialize as he wants favorable terms including big tax incentives and free land that most governments can’t accommodate.

5 Foxconn seeks other investment opportunities in India

The company and Chinese e-commerce giant Alibaba Group Holding Ltd. are in talks to jointly invest about $500 million in Snapdeal.com, a five-year-old Indian e-commerce startup. The deal would give Foxconn a retail foothold in India where it has experienced booming demand for smartphones. Foxconn is also setting up a new production site for Chinese smartphone maker Xiaomi Corp. in India.

via 5 Things to Know about Foxconn’s Overseas Ambitions – WSJ.

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