Foxconn to Invest $1.5 Billion to Build New Display Module Plant for Apple in India

What Happened?

Apple supplier Foxconn announced it will invest $1.5 billion dollars to build a new display module plant near Chennai, India which will be used to assemble screen components for iPhones. The new plant will be used to make brightness controls and the touch interface for iPhones. 

The new facilities will be in addition to several others already assembling and shipping iPhone for Apple from India.

Why it Matters

Following the steep tariffs on China imposed by the Trump Administration, Apple began looking for ways to diversify its supply chain for iPhones. Most of the manufacturing and assembly of iPhones has been done by Foxconn in China, however the Apple supplier has expanded operations to several locations in India.

The move comes after President Trump advised Apple not to build in India, saying ‘I said to him (Tim Cook, Apple’s CEO), “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.’

Apple has ignored the warning from President Trump and continued to look for ways to expand its supply chain beyond China. According to Reuters, a new Tata Electronics plant in Hosur in south India's Tamil Nadu state started operations in April to make older iPhone models. Another $2.6 billion plant is under construction in Bengaluru and is expected to begin operations soon.

All told, Apple supply operations in India will create some 50,000 new jobs, which is undoubtedly why the Trump Administration wanted Apple to move its supply chain to the United States. But low production costs in India and China are a major reason why Apple has been so profitable. While some iPhones sell for hundreds of dollars they can be assembled for as little as $40 per phone in places like China and India. 

Moving production to the United States would significantly increase the cost of producing iPhones due to higher worker pay and benefits. Wedbush Securities analyst Dan Ives said that building an iPhone in the U.S. would increase its cost to at least $2,000—and potentially as high as $3,500. Such an increase would certainly lead to a drastic decrease in sales for Apple. 

The U.S. government cannot legally compel a private company like Apple to move production from India and China to the United States. But the Trump Administration can enact policies such as tariffs that make overseas production for Apple more difficult and expensive. 

How it Affects You

iPhone users can expect Apple to continue to find ways around the tariffs imposed by the Trump Administration on China, which means at least for the foreseeable future, iPhones will continue to be made abroad. Consumers have not shown any interest in where iPhones are made, only that they continue to deliver newer and better features for the lowest possible price.