Livemint: August 14, 2015
Mumbai: Terry Gou, founder and chairman of the world’s largest contract manufacturer Foxconn, the trade name for Hon Hai Precision Industry Co. Ltd, made headlines this month when he announced the company’s intention to set up 10-12 factories in India over the next 10 years. So when Gou cancelled his scheduled press conference in Mumbai where he was to launch the Foxconn Media Lab in association with Whistling Woods International—an institute for film, fashion and communication founded by filmmaker Subhash Ghai—on Friday, many were disappointed. The reason became apparent on Saturday when Gou announced a $5 billion investment in Maharashtra in addition to the agreement with Ghai for media content creation.
In an interview, Gou spelt out his reasons for choosing Maharashtra over other states for investment and his vision of having a factory in every Indian state over the next 10 years. Edited excerpts:
Earlier this month, you said you will invest over $2 billion over the next five years in India. You have now announced a $5 billion investment in Maharashtra.
I never said this (referring to the $2 billion investment announcement). The media reported it that way. Any investment should be a signed contract like the $5 billion one we announced.
Why did you choose Maharashtra, and what does the investment entail?
Our teams were working on this deal for the last two months, and they were up till Saturday morning to make this agreement possible. If Maharashtra changes, India changes. We plan to set up an electronics unit somewhere between Mumbai and Pune (Talegaon, a district close to Pune, has emerged as one option), for which the government has identified some 1,500 acres. The unit is expected to provide around 50,000 jobs initially.
Terry Gou, 64Terry Gou is founder, chairman and chief executive of Foxconn, the world’s largest contract manufacturer of electronic products. His company counts Apple Inc., Dell Inc., Amazon.com Inc., Hewlett-Packard Inc. and Sony Corp. among its clients. In 2014, Foxconn’s revenue stood at $132.9 billion, and it was ranked 32nd among the Fortune 500.
There are many reasons for choosing Maharashtra as the first state for our investment. To begin with, it has many R&D (research and development) units and many multinationals have set up base here. The Devendra Fadnavis government has also provided a strong leadership, incentives and shown implementation skills.
We do not as yet have a fixed timeline, but Maharashtra will be Foxconn’s technology base in India. We want to tap India for its people skills too. There is a lot of IT (information technology) in Maharashtra. We want to use the young talent that we have in this state to go to our factories in Taiwan and China to study, work and then come back and work here in the state. They will have seen how the hi-tech industry works in those countries—how the design and manufacturing works. It can be a one-year or two-year programme. This is how the technology transfer will work.
But what exactly are you trying to build here?
We are building a plant to manufacture electronic components. We prefer to call it hi-tech manufacturing. The details are yet to be finalized. We are yet to work out which components we want to manufacture here. It could be a three-year programme as the CM (chief minister Fadnavis) suggested. In the first phase, we hope to assemble some components while manufacturing some. The second phase is about Skill India, so we have precision (engineering), tooling, components and even automation or testing labs. The third phase is about key components as part of the hi-tech manufacturing. The products will include smartphones, smart TVs, etc, and we could also manufacture TFTs (thin-film transistors, or a technology that is a variant of a liquid crystal display, or LCD, is common in computers, and improves image quality). This will take time. We need to see results, but based on India’s talent, I’m very positive.
Which other states are you targeting to set up the proposed 10-12 factories?
India is so big. Maybe in 10 years, we can have a factory in every state.
What challenges do you foresee in India other than skill development?
There are infrastructure problems like (irregular) power supply, safety, transportation and even communications. We need a 4G (fourth-generation) technology environment. Supply chain is another issue. If you do not have good logistics, it’s difficult to function. We want to come here to push these initiatives forward along with the support of the state government. We will also work with local partners to build the supply chain.
Is the agreement different from the one you signed with Adani Enterprises Ltd? (On 4 August, the ‘Press Trust of India’ reported that Adani Enterprises is in talks with Foxconn to form a joint venture that is likely to make Apple iPhones in India.)
Yes. That is a different deal. We have not finalized our partners for the factory in Maharashtra.
Your company adopts cutting-edge technology. For instance, you also use industrial robots in your factory in China. How do these ideas fit in a country like India, which needs jobs?
At this moment, I can’t speak about India. But even robots require a lot of design engineering. The initial idea in Maharashtra, though, is to provide labour-intensive manufacturing work to create jobs. Maybe in the future, the more boring jobs will go to the robots, while the youth get more challenging assignments.
How often do you visit India?
In the last two months, I visited India twice. Every time I come here, I stay for almost a week. This is my second visit to Mumbai.
Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.