Apple's vendor planning to set up second factory, Pegatron explained

Pegatron is planning to set up its second factory near Chennai in Tamil Nadu. Pegatron opened its first plant only six months ago

Apple Inc's Taiwanese supplier Pegatron Corp is planning to set up its second manufacturing facility in India, Reuters has reported. According to experts familiar with the situation, the decision is consistent with the American tech giant's strategy of diversifying its production away from China.

Pegatron is planning to set up its second factory near the southern city of Chennai in Tamil Nadu. Pegatron opened its first plant only six months ago. In doing so, it invested $150 million, the report said, quoting unnamed sources.

What is Pegatron Corp?

Pegatron Corporation is engaged in developing, manufacturing, and designing computers, computer hardware, portable devices, and associated peripheral devices. It was founded on January 1, 2008, and is based in Taiwan.

Currently, Pegatron accounts for 10 per cent of Apple's iPhone production in India annually, a Reuters report said. Pegatron has plans to expand its operations in Southeast Asia and North America.

The plans for a second Pegatron facility on lease are ongoing. It will be located inside Mahindra World City near Chennai, just around where the company inaugurated its first plant in September 2022.

Pegatron had earlier been in the news for its poor working conditions and mistreatment of employees in China. According to a Wall Street Journal report published in November 2020, Apple discovered that Pegatron was using student workers in factories in mainland China.

Due to this, Apple suspended their business with Pegatron and stated that it would not grant the company any new business until this practice was ceased.

Apple's expansion plans in India

Apple Inc has prioritised India in its expansion strategy. To this end, it established iPhone assembly facilities in the country in 2017 through its suppliers, Wistron and Foxconn.

Besides iPhones, Apple plans to manufacture its wireless earphones through Foxconn in India. Notably, the Indian government has pushed for local manufacturing of mobile devices through its production-linked incentive (PLI) schemes.

What is the PLI scheme?

Through a gazette notification dated April 1, 2020, the Centre announced a production-linked incentive scheme to boost domestic manufacturing and attract large investments in mobile phone manufacturing and specified electronic components, including Assembly, Testing, Marking and Packaging (ATMP) units.

Apple is leading the domestic manufacturing and exports from India and is among the major beneficiaries of the scheme.

Apple is the first company to export over $1 billion worth of iPhones within a month in December 2022. It had clocked over Rs 30,000 crore of exports in the nine months of April-December 2022, which accounted for around 40 per cent of the total smartphone exports in value from the country, Business Standard reported.