Apple and Foxconn win labor reforms to advance Indian manufacturing plans

Apple and its manufacturing partner Foxconn were among the companies behind a groundbreaking liberalization of labor laws in the Indian state of Karnataka this month, according to three people familiar with the matter.

Their successful lobbying for new legislation means that production can take place in India in two shifts, similar to the practices of the two companies in China, their primary production base. The law gives the southern state one of the most flexible working regimes in India as the country strives to become an alternative manufacturing base to China.

The move from Karnataka is an attempt to seize the opportunity created by companies seeking to end over-reliance on Chinese manufacturing after months of disruption from Covid-19 that has shaken global supply chains.

“India is going to be the next big manufacturing center,” said an Indian government official, who asked to remain anonymous. “If we compare India with other countries . . . we need to increase our efficiency by a large margin in terms of increasing work output.”

Rajeev Chandrasekhar, India’s electronics and IT minister, said last week that Apple phones would be produced at a new 300-hectare factory in Karnataka. Foxconn has not confirmed factory plans.

The state, a hub for India’s tech industry, last week passed an amendment to its factory law that would allow 12-hour shifts and night work for women, who dominate electronics production lines in China, Taiwan and Vietnam but are underrepresented in the Indian labor force. The legislation limits the maximum working time to 48 hours per week, but also expands the number of overtime hours allowed to 145 over a three-month period, from a previous 75.

The official said Karnataka changed its labor law after “much input” from Indian industry lobby groups and foreign companies, including Foxconn and Apple. Foxconn and Apple both declined to comment.

“This is something that we and the customer have been pursuing,” said a person close to Foxconn, referring to Apple. “It’s an adjustment that’s crucial to build efficient production here on a large scale.”

The person said India, which will overtake China as the most populous country in the world this year, is a promising market that Foxconn can no longer ignore, but large gaps remain in the investment climate between India and China.

“Being able to run production with two 12-hour shifts around the clock would be a big step in getting us closer to where we need to be,” the person said.

Narendra Modi’s government is trying to boost manufacturing, which still plays a modest role in India’s service economy, under a “Make in India” push.

Both the central government and Indian states, especially in southern India, are offering incentives to investors in electronics and other sectors in an effort to lure diversified manufacturers away from China.

Foxconn, which currently makes iPhones at a factory in the state of Tamil Nadu, has spoken of expanding its operations in Karnataka and the neighboring state of Telangana, but has not detailed its plans to manufacture for Apple. However, Foxconn chairman Young Liu visited the cities of Hyderabad in Telangana and Bengaluru in Karnataka last week, one of the clearest signs yet that the Taiwanese electronics group plans to expand its footprint in India.

Apple also has its iPhones assembled in India at factories operated by rival Taiwanese contract manufacturers Pegatron and Wistron.

-Additional reporting by Patrick McGee in San Francisco

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