Foxconn saga: Recall of Chinese workers hits India's iPhone manufacturing

With the recall of the Chinese workforce, the effort to transfer technology built by Apple has been interrupted at Indian plants

At a time when the automobile industry is coping with the shortage of heavy rare earth magnets, sourced primarily from China, Taiwanese contract manufacturer Foxconn Hon Hai has delivered a blow to manufacturing of Apple products in India. Ahead of the iPhone 17 launch, which was supposed to have brought India centre stage in Apple’s global supply chain, Foxconn has ordered hundreds of Chinese technicians and engineers to leave the Indian factories and return home. While there’s no official reason for the recall, people in the know explained that it was at behest of the Chinese government, which has a hold over the Taiwanese firm.

 

For Foxconn, which is the biggest iPhone assembler for the Cupertino major, China accounts for 65-70 per cent of its total revenues. In fact, half of Foxconn’s long-term assets are located in China. 

 

Foxconn has maintained silence on the matter.

 

Amid the geopolitical disruptions, experts watching this space believe that the recall of workers is just one aspect in a multi-pronged Chinese onslaught on India. The aim is to disrupt the country’s  attempt and initial success to  offer an alternative competitive global supply chain to multinationals as part of the China plus strategy. The move should be seen against the backdrop of the possibility of the United States imposing higher tariffs on China compared to India, experts pointed out. If that happens, Indian electronics exports would get a major boost — something China would want to prevent. 

 

 

China has already tried to block big government-supported infrastructure projects by stopping exports of tunnel boring machines to India. Those machines are crucial for the bullet train project and metro rail expansion, among others. The current automobile industry crisis adds to the onslaught. Production in the auto sector, where India is the fourth largest in the world, has been threatened after China stalled the supply of crucial rare earth magnets.  

 

As for Apple Inc, there have been developments even before the recent recall of workers and engineers. For nearly a year, critical machines required to make iPhones, including  the upcoming iPhone 17, have been held or stopped in custom ports. Also, a few companies, which were looking for land to build factories to make iPhones in India, have shelved their plans. More factories would have helped Apple Inc to shift a large part of its global production from China to India.

 

According to officials and industry executives, India’s success in the Apple story prompted a series of steps from China. In just four years, Apple has become one the largest manufacturing success stories in the country, through its vendors, with its market value  touching over $30 billion. Its exports of over $17.5 billion has helped smartphones become the second largest exports from the country based on HS codes. It has also emerged as the largest employer in the manufacturing sector. 

 

In FY 2025, around 18 per cent of iPhone assembly has shifted to India from China, according to estimates.    

 

Apple cart upset

 

But, how does the exit of the Chinese workers, technicians affect India? According to officials, the Chinese technicians brought in by Foxconn were mandated to train blue coloured workers in the Indian factories. On last count, there were some 150,000  workers on these campuses. The Chinese engineers and technicians, already well-versed in this space, concentrated on transferring the technology built by Apple in order to make new phones and machines. 

 

With the recall of the Chinese workforce, the effort to transfer the skills has been interrupted at Indian plants, officials admitted. The recall has upset the ‘Apple cart’, as some officials described the development.  “Apple Inc, of course,  can hire similar talent from Taiwan or Japan, but they will cost two to three times more than the Chinese,” says a senior executive of a key Apple Inc vendor.

 

In machines, Apple is looking at Japan or South Korea for importing them. The other option is to manufacture them from home-grown companies. Even so, the cost would be at least three times more than China.

 

The Chinese attack, according to a vendor, says is also meant to expose the dependence of the Indian supply chain on Chinese imports. “Even for laptops, mobiles, servers, Chinese components are required to make the final product. They (China) will surely rethink any move in relation to India”  

 

Analysts argue that China’s response is a “tit for tat”. They believe India’s move against Chinese companies after the Galwan border skirmishes has taken its toll.

 

More recently, the Chinese  concerns may have intensified after Apple CEO Tim Cook announced that most of the US-bound iPhones would now be supplied from India. Cook’s projection meant doubling of iPhone production in India (from $21 billion in FY25) in two years. In other words,  a big loss to China. 

 

The auto brakes

 

The export order of China on heavy rare earth magnets (which was imposed globally) came in handy. China stopped its supplies from April in India. Without the rare earth magnets, the production of EVs (electric vehicles) and ICE (internal combustion engine) cars as well as two wheelers could come to an abrupt  halt. Most companies say their stocks will last only till July end.

 

On this matter, the Indian industry has failed to get a hearing. A delegation of auto companies sought to make a presentation to the commerce ministry in China, but the visit has remained stalled for over a month. Also, import of light rare earth magnets--not under the export order and can be used in electric scooters-- has not been cleared either.  China is learnt to have met industry delegations from Japan and has started delivering magnets to European as well as US car makers,  after an interim deal reducing tariffs by both sides. 

 

India response

 

The government is not too worried, a top official said. 

 

“On smartphones, the recall  of Chinese workers may lead to a temporary disruption for a month or two,’’ a senior official of the Ministry of Electronics and Information technology (Meity) said. 

 

There are many Indian companies manufacturing the machines required and there is enough Indian skilled talent to run the smartphone operations, he added. 

 

The government is also pushing a policy to reduce dependence on China for critical areas. Apple Inc, for instance, is already in talks with home grown capital equipment makers for rolling out iPhones.

 

To make rare earth magnet, the Ministry of Heavy Industries (MHI) is expected to come out with a production linked incentive scheme. As Ather Energy CEO Tarun Mehta says, many start ups are working on magnet less motors.              

 

Yet, all these initiatives will take time in India’s battle for self-reliance.