Apple supplier Foxconn wins AirPod order, plans $200 mln factory in India - source

Foxconn Interconnect Technology

16/03/2023 03:00

By Yimou Lee
       TAIPEI, March 16 (Reuters) - Taiwanese contract
manufacturer Foxconn  2317.TW  has won an order to make AirPods
for Apple Inc  AAPL.O  and plans to build a factory in India to
produce the wireless earphones, two people with direct knowledge
of the matter told Reuters.
    The deal will see Foxconn, the world's largest contract
electronics maker and assembler of around 70% of all iPhones,
become an AirPod supplier for the first time and underlines
efforts by the key Apple supplier to further diversify
production away from China. AirPods are currently made by a
range of Chinese suppliers.
    One source said Foxconn will invest more than $200 million
in the new India AirPod plant in the southern Indian state of
Telangana. It wasn't immediately clear how much the AirPod order
would be worth.
    The person, who requested anonymity as the matter was not
public yet, said Foxconn officials had debated internally for
months about whether to assemble AirPods due to relatively lower
profit margins on making the device, but ultimately opted to go
ahead with the deal to "reinforce engagement" with Apple.
    "That way, we are more likely to get orders for their new
products," the person said. 
    The decision to set up production in India was requested by
Apple, according to the source.
    Foxconn vies with Taiwanese rivals such as Wistron Corp
 3231.TW  and Pegatron Corp  4938.TW  to win more orders from
Apple, the world's most valuable company. 
    A subsidiary, Foxconn Interconnect Technology Ltd  6088.HK ,
plans to start construction of a manufacturing facility in
Telangana in the second half of this year and begin production
by the end of 2024 at the earliest, the person said. 
    A second person with direct knowledge of the matter, who
also declined to be identified as the matter was not yet public,
said the Foxconn subsidiary will make AirPods in India without
providing further details.
    Analysts have previously said Apple has asked suppliers
including Foxconn to make AirPods in India, but details such as
the size of investment, timeline and which suppliers have
manufacturing plans in the country have not been disclosed.
    Foxconn declined to comment. Apple did not immediately
respond to a request for comment.
    Apple and its key suppliers have been shifting production
away from China, where strict COVID-19 curbs disrupted Foxconn's
biggest iPhone factory last year. They are also seeking to avoid
a potential hit to business from mounting Sino-U.S. trade
friction.
    Foxconn said on Wednesday it would ramp up investment
outside China to meet customer demand and lower its reliance on
China for production.
    It was not immediately clear whether Foxconn's production
plan would have impact on current AirPod suppliers, including
Luxshare Precision Industry  002475.SZ . 
    Luxshare did not immediately reply to a Reuters' request for
comment.
    Goertek Inc  002241.SZ , another supplier, said in November
an overseas client had asked it to suspend assembly work for a
smart acoustic product, which analysts at the time identified as
AirPods Pro 2, and the suspension would hit revenue by up to 
3.3 billion yuan ($480 million).
    Goertek did not respond to a request for comment.  
          
  
($1 = 6.8864 Chinese yuan renminbi)

 (Reporting By Yimou Lee; Additional reporting by Munsif
Vengattil in New Delhi and Josh Horwitz in Shanghai; Editing by
Miyoung Kim and Kenneth Maxwell)
 ((yimou.lee@thomsonreuters.com; +886-2-8729-5122;))