Foxconn Gets Approval to Construct India Chip Plant, Secures $433 Million Deal

India has approved construction of a $433 million semiconductor plant by the world’s biggest contract electronics maker, Foxconn in its northern state of Uttar Pradesh. According to CNBC, Foxconn’s India chip plant will be constructed in partnership with IT giant HCL Group.

2027 Target

The Indian government said Foxconn’s semiconductor facility in India will start operating in 2027. The plant is designed to produce wafers and display driver chips for laptops, smartphones, automobiles, and personal computers. Wafers are used to create a base for chips. They are thin, circular slices made using semiconductor material.

But India does not have advanced chip fabrication facilities currently. This means that chip fabrication will not commence at the facility immediately. Instead, the plant will initially serve as a semiconductor assembly and test facility with most activities focused on provision of chip packaging and testing services.

Foxconn is a major manufacturer for Apple. The latest deal is aimed at reducing Apple’s dependence on China as it shifts production of more components to India. Early this month, Foxconn started producing iPhones in India at the new Tata Electronics factory in Hosur, Tamil Nadu. Another major plant by Foxconn near Bengaluru is also set to begin operations soon.

A Major Step

Despite the lack of fabrication facilities in the country, the Indian government views the establishment of the display driver chip manufacturing plant as a major step towards setting up the infrastructure required to manufacture chips that power Apple devices. This process starts with the testing of display panel chips that will be done in the new facility.

Speaking during a press conference in New Delhi, India’s IT Minister Ashwini Vaishnaw said,
“Once this unit is there, the display panel [manufacturing] will also come to India. The unit will have a capacity of 20,000 wafers per month and can produce 36 million display driver chips monthly, Vaishnaw said.”

The HCL Foxconn partnership deal comes at a time when contract electronic manufacturers are moving from China to India due to the trade tensions between Washington and Beijing.

Apple has been working on moving its iPhone manufacturing component to India as production in China faces tariff threats.

Currently, Apple assembles 90% of its flagship smartphones in China. Bernstein analysts predict that India could account for up to 20% of Apple’s total iPhone production by the end of this year. Already, about 10% to 15% of iPhones are currently produced in India, according to Evercore ISI.

US Reaction

But the US President Donald Trump isn’t pleased with Apple’s decision to shift iPhone production to India. In a meeting with CEO Tim Cook on May 14, Trump hit at Apple’s strategy to diversify iPhone production in Asia.

“I had a little problem with Tim Cook yesterday. I said to him, my friend, I treated you very good. You’re coming here with $500 billion, but now I hear you’re building all over India.’ I don’t want you building in India,” Trump said.

Trump made reference to the $500 billion investment commitment that Apple announced in February.

“We put up with all the plants that you built in China for years, now you got to build us. We’re not interested in you building in India, India can take care of themselves, we want you to build here,” Trump added.

Last month, Trump exempted most Apple electronic products like computers and smartphones from reciprocal tariffs. However, officials say the exemptions might be temporary. The Department of Commerce in the US has been undertaking security investigations on chip technology imports and related products.

These investigations may result in new tariffs. Early this week, the US reduced tariffs on imports from China to 30%. Imports from other countries, including Vietnam and India are currently subject to a 10% tariff.