Tatas set to take over second Taiwanese iPhone contract manufacturer plant

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The Tatas are preparing to expand their role as a contract manufacturer of Apple phones with inching close to clinching a deal with Taiwanese Pegatron and taking over its factory near Chennai that already manufactures iPhones. Pegatron is one of the three contract manufacturers that make iPhones under the Production Linked Incentive scheme in this country.

“The deal is expected to be completed in the coming two to three months, or, (at the) latest, by the second quarter of the fiscal year. However, as of now, it’s unclear if this will be a Wistron-type buyout or a joint venture,” an official told The Economic Times. Apparently, the parties are now toying with both options.

Like Foxconn, the largest contract manufacturer for Apple and Wistron, Pegatron is headquartered in Taiwan.

Pegatron has about 9,500 people on its payroll in India who churn out about 45 lakh iPhones a year. In fact, the company’s relation with Apple has been a short-lived one as it began Indian operations only in 2022.

The Tatas became the first Indian manufacturer of iPhones in November 2023 when it took hold of Wistron’s operations in this country for about Rs 1,000 crore (about $125 million).

Officials told the newspaper that the payout to takeover Pegatron’s assets will be less than that in the case of Wistron since Pegatron is a smaller firm. Moreover, there will be a smaller time window of less than two years under the production-linked incentive (PLI) scheme by the time the deal is concluded.

Pegatron started manufacturing iPhones a year later compared to Foxconn and Wistron. Pegatron has assured the government to invest Rs 1,132 crore between 2022-23 and 2024-25 under the PLI scheme.

Tata Electronics could be the vehicle that the group will use for the takeover.

One of the factors that might have prompted a quick closure of the deal between the Tatas and Pegatron is Apple’s eagerness for a smooth production ecosystem just before its new phone launch expected in September. To meet that deadline, production has to reach top gear in the period between June and August.

When Apple began production in India, all its contract manufacturers were from Taiwan – Foxconn, Pegatron and Wistron. But as the ecosystem developed Indian investors became significant players. “Not only iPhone production, but even components and sub-assemblies are being handled by Indian firms, thereby creating the whole ecosystem,” said an executive in the electronics industry.

The iPhone manufacturing ecosystem is located across the states of Tamil Nadu, Karnataka, Uttar Pradesh, Andhra Pradesh and Haryana.

India has also turned out to be a hub from where Apple exports iPhones to major markets. Till February 2024, iPhones worth more than Rs 1 lakh crore were manufactured in India.

The government is predictably happy at the prospective Pegatron deal. “Happy to note that Indian champions are emerging in mobile phone manufacturing. As the sector grows, more and more young citizens are finding new employment opportunities,” Union IT minister Ashwini Vaishnaw told the Economic Times.