Tata Sons is all set to set up a mobile phone and component contract manufacturing plant of global standards in Tamil Nadu for which it is seeking up to $1 billion in overseas loans. The manufacturing unit will start by making iPhone parts.
As various multinationals are looking for diverse production centres, group chairman N Chandrasekaran’s wants to attract brands like Apple to opt India as their production centre, bypassing China.
Tata electronics which is a wholly-owned subsidiary of Tata Sons will lead the initiative, beginning with iPhone casings and eventually partnering other original equipment manufacturers (OEMs) in South Korea and Japan as part of a “larger electronics ecosystem,” Economic Times reported.
The partnership with Apple will be part of Prime Minister Narendra Modi’s Make in India push and will take advantage of the government’s production-linked incentive (PLI) scheme which was released in August.
Tata Group is looking at a total capital expenditure of $1.5 billion for the priority project through a combination of internal accruals and borrowings also it’s seeking $750 million-1 billion in external commercial borrowings (ECB).
Natarajan Chandrasekaran said, “This offers high growth potential for the group provided the execution is done well and by roping in top management with expertise in this area.”
“The group is identifying the right CEO to head this venture and also roping in directors from GE.” He added.
Samsung and three major contract manufacturing partners of Apple Foxconn, Wistron and Pegatron are among the 16 firms that have signed up for India’s $6.65 billion PLI scheme aimed at boosting domestic smartphone production over the next five years.
Tamil Nadu in its Electronics Hardware Manufacturing Policy 2020 targeted at increasing output to $100 billion by 2025 or a fourth of total electronic exports by that year. Tata Electronics has already been allotted 500 acres by the Tamil Nadu Industrial Development Corp. (Tidco) in Hosur.
Tata is looking forward to starting the project in the third quarter of next year. According to an executive “The financing will primarily be in foreign currency as the lion’s share of the equipment will have to be imported,” he added, “The group is looking to be a key electronic component supplier to the top five OEMs of the world.”
Tata and Apple already have a relationship involving retail chain Croma.
Apple has been assembling some iPhone models in India for a while now. Analysts said the entry of all three of its key vendors highlights how the US technology giant is derisking its production and supply chain by diversifying manufacturing bases.
Apple has tried to lower its dependency on China by choosing locations such as Vietnam since 2017. But China is still the location for 90% of units that assemble Apple products. In 2019, 48% of Apple’s component suppliers for circuit boards, glass, cables and batteries were in China.
The share of Apple in India’s mobile phone market was approximately 3.35% in July 2020, according to Statista. Apple recently opened its first online store in India.