Foxconn is building a $200 million factory in India after winning an AirPod order from Apple

There is a strong likelihood that Foxconn, the Taiwanese contract manufacturer, will manufacture Apple's AirPods and plans to construct its own factory in India for the production of the wireless earphones after it won the order for making the AirPods. Two people with direct knowledge of the matter told Trade Algo.

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It will mark Foxconn's first time as an AirPod supplier, and it underlines the supplier's efforts to diversify away from China as it takes around 70% of all iPhones. There are currently a number of Chinese suppliers making AirPods.

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Several sources have indicated that Foxconn is committed to investing more than $200 million in the new India AirPod plant in the state of Telangana in the southern part of the country. AirPods have been in high demand in recent months, but their worth wasn't immediately clear.

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Foxconn officials debated internally for months about whether to assemble AirPods because the device has relatively lower profit margins. However, they ultimately decided to proceed with the deal to “reinforce engagement” with Apple. The person requested anonymity since the matter has not yet been made public.

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“We're more likely to get orders for their new products that way,” the person said.

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Apparently, Apple requested to set up production in India.

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To win more orders from Apple, the world's most valuable company, Foxconn has to compete with Taiwanese competitors such as Wistron and Pegatron.

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In the second half of this year, Foxconn Interconnect Technology plans to begin construction of a new manufacturing facility in Telangana with the aim of starting production as soon as possible. The facility is expected to be operational by the end of 2024 at the latest.

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Foxconn shares jumped nearly 9% after Reuters reported the news, reversing an earlier loss of 2.2%. Foxconn shares traded 0.5% higher, while Taipei's benchmark was down 1.1%.

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Another person with direct knowledge of the matter, who also declined to be identified as the matter was not yet public, said that Foxconn's subsidiary will manufacture AirPods in India without providing any further information on the matter.

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There has been speculation that Apple has asked suppliers, including Foxconn, to produce AirPods in India, but details such as the size of the investment, timeline, and which suppliers are planning to manufacture in the country have yet to be revealed by Apple or the analysts.

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Foxconn did not respond to a request for comment. Comments from Apple were not immediately available.

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Since Foxconn's biggest iPhone factory, the largest in the world, was disrupted last year by the strict Covid-19 curbs mandated by the Chinese government, Apple and its key suppliers have been shifting production away from China. Moreover, they are also looking to avoid a potential loss of business as a result of mounting Sino-U.S. trade friction.

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On Wednesday, Foxconn said that it would increase investments outside of China in order to meet customer demand and reduce its reliance on Chinese suppliers.

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Foxconn's production plan, including Luxshare Precision Industry, has not yet been confirmed to affect current AirPod suppliers.

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Trade Algo's request for comment was not immediately answered by Luxshare.

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Goertek, another supplier, announced in November that an overseas client had asked it to suspend assembly work for a smart acoustic product, which analysts at the time identified as the AirPods Pro 2. The suspension is expected to cut revenue by as much as 3.3 billion yuan ($480 million).

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Goertek declined to comment.