By Anand Parthasarathy
March 6 2023: ‘There's many a slip 'twixt the cup and the lip’ runs a proverb attributed variously to ancient Britons and Greeks. |
A modern update could run thus – and it sounds very prescient indeed today: ‘An MOU or Memorandum of Understanding is not a done thing’.
Announcements by the governments of Karnataka and Telangana, on consecutive days last week, suggested that Taiwan-headquartered contract-electronic manufacturing giant Foxconn had decided to set up its next Indian manufacturing facility in their respective states.
Soon after a visit to Hyderabad, of Young Liu, Chairman and CEO of Foxconn, the world’s largest technology products contract manufacturer, Telangana IT Minister K.T. Rama Rao tweeted:
Super stoked to announce a mega investment by @HonHai_Foxconn in Telangana that will create employment for a whopping One Lakh youngsters in Telangana The announcement is made after Chairman of FoxConn Mr Young Liu met Hon’ble CM Sri KCR Garu at Pragathi Bhavan today pic.twitter.com/zzFAnBxcvz — KTR (@KTRBRS) March 2, 2023
A day later, soon after Liu had a meeting with him in Bengaluru, Karnataka Chief Minister Basavaraj Bommai tweeted on:
Apple phones to be built in the state soon. Apart from creating about 100,000 jobs, it will create a whole lot of opportunities for Karnataka. Under the visionary leadership of Hon’ble PM @narendramodi Ji, we will do our share to make India a $5 trillion economy by 2025. https://t.co/bdcVuVHkvT — Basavaraj S Bommai (@BSBommai)March 3, 2023
Bloomberg added weight to the Karnataka government’s announcement with its own report, adding new detail: that Foxconn planned to invest about $700 million on a new plant to make iPhone parts on a 300-acre site close to Bengaluru airport as well as kickstarting an electric vehicle business. It repeated the projection that the new production site in India was expected to create about 100,000 jobs, adding that this may shift the crown of world’s largest producer of consumer electronics from China to India.
Reuters picked up the Bloomberg lead. And with two media heavyweights seemingly confirming the news, the ‘Foxconn to make iPhones in new Bengaluru plant’ story made the lead in almost all of Indian business media on March 4 and was retweeted by some in government including Union IT Minister Rajeev Chandrasekhar.
Some of this congratulatory coverage doubtless reached the Foxconn chief soon after he was back in his global headquarters in Taipei, at the weekend.
Jumped the gun?
It would appear that both southern states might have jumped the gun. Officially released photos showed the Chief Ministers of Telangana and Karnataka, exchanging Memoranda of Understanding with Mr. Liu. But clearly, they were just that – an understanding, nothing more.
In a statement released in Taiwan on March 4 which reached India through the news agency AFP, the company said:
"Foxconn has not entered into binding, definitive agreements for new investments during this trip", adding "Negotiations and internal review are ongoing. Financial investment sums discussed in media are not information being released by Foxconn.”
Foxconn has manufacturing plants in ten countries – the maximum number in China. It is true that Covid-related problems which continue to beset China, have affected the supply chain for Apple’s iPhones and Foxconn is in all probability looking at countries where it already has plants, to make up for reduced manufacturing in China.
In India since 2015
Foxconn has been in India since 2015 through its subsidiary, Bharat FIH, and operates three plants – at Sri City, Andhra Pradesh and at Sriperumbudur and Sunguvarchatram in Tamil Nadu, where it manufactures electronic products for multiple clients including Xiaomi and Nokia.
Since 2019, it has also been assembling iPhones in India at the Sriperumbudur plant, including the latest iPhone 14, so it makes sense that India would figure on its shortlist to expand iPhone manufacturing capability.
The Foxconn chief’s week-long visit to India, during which he also had a meeting with Prime Minister Modi, may well have been exploratory in nature, with a new iPhone plant on the radar.
In Hyderabad, Mr. Liu inaugurated what is touted as India’s largest hardware prototyping centre, T-Works and donated a Surface Mount Technology (SMT) assembly line , useful for making high-end electronic circuit boards.
But two states suggesting (and presumably believing), each was the favoured choice of Foxconn for any new expansion in India, seems like part of a familiar business-world scenario: get two or more parties competing for your business: that way you end up with a good deal.
Karnataka and Telangana way have some work to do, polishing their respective fiscal and logistic packages, if Foxconn is to home on to one of them for its India expansion. As its carefully worded statement says “Negotiations are ongoing”.
May the best state win. The deal ain’t done – yet.
This article has appeared in Swarajya