Apple and Foxconn win labour reforms to advance Indian production plans

Apple and its manufacturing partner Foxconn were among the companies behind a landmark liberalisation of labour laws in the Indian state of Karnataka last month, according to three people familiar with the matter.

Their successful lobbying for new legislation means two-shift production can take place in India, akin to the two companies’ practices in China, their primary manufacturing base. The law gives the southern state one of the most flexible working regimes in India as the country aims to become an alternative manufacturing base to China.

Karnataka’s move is an attempt to seize the opportunity created by companies that are seeking to end an over reliance on Chinese manufacturing, following months of Covid-19 disruption that has shaken global supply chains.

“India is due to become the next big manufacturing hub,” an Indian government official said, who asked to remain anonymous. “When we compare India with other countries . . . we have to increase by a big margin our efficiency in terms of increasing the work output.” 

Rajeev Chandrasekhar, India’s electronics and IT minister, said last week that Apple phones would be produced at a new 300-acre factory in Karnataka. Foxconn has not confirmed any factory plans.

The state, a centre for India’s tech industry, last week passed an amendment to its application of the factories act allowing for 12-hour shifts, up from the previous limit of nine hours. It also eased rules on night-time work for women, who dominate electronics production lines in China, Taiwan and Vietnam but are under represented in India’s workforce. The legislation caps maximum working hours at 48 per week, but also expands the number of allowable overtime hours to 145 over a three-month period, from a previous 75.

The official said Karnataka had amended its labour law after “a lot of inputs” from Indian industry lobby groups and foreign companies, including Foxconn and Apple. Foxconn and Apple both declined to comment.

“This is something we and the customer have been pursuing,” said a person close to Foxconn, referring to Apple. “It is an adjustment that’s crucial for building efficient manufacturing here at scale.” 

The person said that India, which this year is due to overtake China as the world’s most populous country, was a promising market that Foxconn could no longer ignore, but that big gaps remained in the investment environment between India and China.

“Being able to run production with two 12-hour shifts around the clock would be a big step to bring us closer to where we need to be,” the person said.

Narendra Modi’s government is trying to promote manufacturing, which still plays a modest role in India’s service-heavy economy, under a “Make in India” push.

Both the central government and Indian states, especially in India’s south, are offering incentives to investors in electronics and other sectors in a bid to lure manufacturers seeking to diversify away from China.

Foxconn, which currently makes iPhones at a plant in Tamil Nadu state, has spoken of expanding its operations in Karnataka and the neighbouring state of Telangana, but has not spelt out in detail its plans to manufacture for Apple. However, Foxconn’s chair Young Liu visited the cities of Hyderabad in Telangana and Bengaluru in Karnataka last week, in one of the clearest signs yet that the Taiwanese electronics group plans to increase its footprint in India.

Apple also has its iPhones assembled in India at plants operated by rival Taiwanese contract manufacturers Pegatron and Wistron.

-Additional reporting by Patrick McGee in San Francisco