China’s largest private employer is reportedly looking to southern India as a source of cheap labor. Foxconn Technology Group, which makes Apple iPhones and Amazon.com’s Kindle, is quietly mulling the purchase of a recently shuttered Nokia facility in Chennai as part of a planned $2 billion investment in India.
The news comes as Chinese workers reap the benefits of a decade-long period of wage growth. Since 2004, the average annual wage of a worker in China has more than tripled to $8,300, according to official data from China's Ministry of Human Resources and Social Security. The growth is putting pressure on employers and spurring an exodus of manufacturing to countries with lower labor costs, including India and Vietnam. Foxconn has already sent manufacturing units to other emerging markets in recent years, including Brazil and Indonesia.
India offers a double incentive. The country has an enormous domestic market for mobile devices and a much larger pool of qualified labor compared with smaller Southeast Asian countries.
The Times of India says all parties are keeping quiet, but the newspaper cited anonymous sources familiar with the matter, saying Foxconn, the trading name of Taiwan’s Hon Hai Precision Industry, could challenge Lava International, India’s largest domestic smartphone manufacturer for the facility.
Nokia India closed the plant last month, laying off more than 8,000 workers, after Seattle-based Microsoft Corp. ended its mobile purchasing agreement with the facility. Microsoft bought Nokia’s devices division last year in a $7.2 billion deal.
India blocked the sale of the Nokia facility over a tax dispute. Now, the country’s telecom and information technology ministry is working out a deal so that the plant can be sold without passing on tax liabilities to the new owner.
"What makes Foxconn's investment plans even stronger is that one of its chief Indian clients, Micromax, is believed to have expressed its intention of sourcing as much as 25 percent of production if Foxconn were to take over the plant," one of the anonymous sources was quotes as saying by the Times.
Micromax outsources the manufacturing of its handsets to Foxconn in China, and if Foxconn shifts production to India, it would coincide with the “Make in India” campaign of the new Narendra Modi administration, which seeks to set up modern manufacturing hubs to attract foreign industrial investment to boost the number of higher-quality jobs.