Taiwanese contract manufacturer Foxconn has won the bid to make AirPods for Apple along with plans to build a factory in India to produce the wireless earphones.
With this deal Foxconn, the world’s largest contract electronics maker and assembler of around 70% of all iPhones, becomes an AirPod supplier for the first time since its introduction.
It also signifies efforts by the supplier to further diversify production away from China, where AirPods are currently made, in order to strengthen supply-chain resilience.
Foxconn already has a facility on the outskirts of Chennai, which opened in 2019, where it assembles iPhones for Apple.
One source said Foxconn will invest more than $200 million in the new India AirPod plant in Telangana.
It isn’t yet clear how much the AirPod order would be worth.
Foxconn officials had debated internally for months “about whether to assemble AirPods due to relatively lower profit margins…”.
They ultimately decided to proceed with the deal to “reinforce engagement” with Apple.
“That way, we are more likely to get orders for their new products,” a source said.
Apple requested to set up production in India according to the source.
MoU signed with Telangana
Foxconn competes with Taiwanese rivals such as Wistron and Pegatron to win more orders from Apple, the world’s most valuable company.
The latest development comes less than a fortnight after Foxconn chairman Young Liu inked a memorandum of understanding with the Telangana government for setting up an electronics manufacturing facility in the state.
Telangana electronics director Sujai Karampuri said the state government was in discussions with Foxconn for a 200-acre site in Ranga Reddy district.
The state itself benefits as the unit is expected to create one lakh direct and indirect employment for youth in the State over a period of 10 years.
To be run by subsidiary
A subsidiary, Foxconn Interconnect Technology is expected to set up the AirPods facility.
It will begin construction of the manufacturing facility in Telangana in the second half of this year and begin production by the end of 2024 at the earliest.
A second source said this subsidiary will make AirPods in India without providing further details.
Analysts have previously said Apple has asked suppliers including Foxconn to make AirPods in India.
However, details such as the size of investment, timeline and which suppliers have manufacturing plans in the country have not been disclosed.
Attempt to shift business from China
Foxconn said it would ramp up investment outside China to meet customer demand and lower its reliance on China for production.
Apple and its key suppliers have been moving production away from China, where strict COVID-19 curbs disrupted activity at Foxconn’s biggest iPhone factory last year.
They are also seeking to avoid a potential hit to business from mounting Sino-U.S. trade friction.
It is not yet clear whether Foxconn’s production plan would have an impact on current AirPod suppliers, including Luxshare Precision Industry.
Another supplier, Goertek, said in November an overseas client had asked it to suspend assembly work for a smart acoustic product, which analysts identified as AirPods Pro 2.
The suspension would hit revenue by up to 3.3 billion yuan ($480 million).