Foxconn planning to set up display assembly unit in Tamil Nadu, may invest $1 billion

Renowned Taiwanese contract manufacturer Foxconn, is reportedly considering a significant investment of approximately $1 billion to establish a display assembly unit in Tamil Nadu.

This move, as reported by the Economic Times, marks Foxconn’s first such facility in India. The primary purpose of this unit is expected to support Apple’s production of iPhone display modules, further solidifying Foxconn’s role as a key supplier for the iconic tech brand.

However, Foxconn’s approach to this new facility will be somewhat unique. It is being designed to not only serve Apple but also to provide components to other contract manufacturers such as Pegatron and Tata Electronics.

By allowing these manufacturers to source locally assembled modules instead of importing them from China, Foxconn aims to reduce dependency on foreign imports and streamline the supply chain.

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Although a specific timeline for the project has not been confirmed, it is understood that Foxconn is keen to have the facility operational as quickly as possible.

The company has already secured approximately 500,000 square feet at the ESR Oragadam Industrial & Logistics Park, located near its existing smartphone assembly plant in Chennai. This strategic location is expected to facilitate seamless integration with their current operations.

Industry experts believe that this new venture will significantly enhance India’s position in the global electronic assembly and manufacturing landscape. The local assembly of display modules is seen as a critical step towards increasing value addition within the country.

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While smartphone assembly currently contributes around 5 per cent in local value addition, the inclusion of display assembly could potentially add an extra 2-3 per cent, a modest but notable improvement.

The move also aligns with Foxconn’s broader strategy to expand its footprint in India. The company has been aggressively growing its smartphone business in the country and has plans to venture into other sectors such as information and communication technology (ICT), electric vehicles (EV), batteries, and semiconductors.

Additionally, Foxconn is set to begin assembling Google Pixel phones in India, and this new unit is expected to further smoothen the manufacturing process for its clients.

From a broader industry perspective, the decision to assemble display modules in India is considered significant. Currently, India relies heavily on imports, particularly from China, for its display requirements. Estimates suggest that 60-65 per cent of display modules across various segments are imported from China, with certain segments relying on China for up to 90 per cent of their needs.

South Korea, the second-largest supplier, accounts for 20-25 per centjkllllll of imports. By establishing local assembly operations, Foxconn could reduce lead times and costs, thereby improving the efficiency of the supply chain.

Despite the potential benefits, there are challenges that Foxconn and other manufacturers may face in this endeavour. One of the key obstacles is the supply of components, which predominantly originates from China. Moreover, India’s current skill set in advanced display technologies is not as developed, which could pose challenges in scaling up operations effectively.

This development ties into Apple’s broader strategy of diversifying its supply chain away from China. As Apple intensifies its focus on India, partners like Foxconn are playing a crucial role in expanding operations and deepening the supply chain within the country.