Tata Group to Make iPhones in India: Acquires Wistron Plant for $125 Million

Tata Group's Strategic Move into iPhone Manufacturing

In a significant development, Taiwan-based Apple contract manufacturer, Wistron Corp, has given the green light to the sale of its manufacturing plant in Karnataka to Tata Group. This strategic maneuver paves the way for Tata Group to become the first Indian entity to embark on the journey of manufacturing iPhones right in the heart of India.

Agreement and Estimated Transaction Price

According to Wistron, the transaction price for the plant sale is provisionally set at $125 million. This monumental decision was reached following a board meeting held by Wistron on Friday.

The meeting was instrumental in granting approval to its subsidiaries, SMS InfoComm (Singapore) and Wistron Hong Kong, to engage in an agreement with Tata Electronics. The agreement concerns the sale of Wistron's entire indirect stake, amounting to 100%, in Wistron InfoComm Manufacturing (India).

Regulatory Approvals and Praise for India's PLI Scheme

While the deal is a major step forward, it's important to note that regulatory approvals are still pending after the signing of the agreement. Discussions and negotiations between Wistron and Tata Group have been in progress for over a year, but formal regulatory clearance is yet to be sought.

India's visionary Production-Linked Incentive (PLI) scheme, led by Prime Minister Narendra Modi, is lauded as the driving force behind transforming the nation into a trusted hub for smartphone manufacturing and exports. Minister of State for Electronics and IT, Rajeev Chandrasekhar, emphasized this achievement, acknowledging Tata Companies' role in manufacturing iPhones for both domestic and global markets within just two and a half years.

Debt Conversion and Implications for PLI Benefits

Additionally, SMS InfoComm (Singapore), a subsidiary of Wistron, is proposing to convert debt totaling $130.26 million into equity, a pivotal part of the agreement. This step adds a unique dimension to the deal's structure. Wistron's current status as one of Apple's three contract manufacturers in India, employing over 10,000 workers at its facility, is significant.

Furthermore, the company is an active participant in the smartphone Production-Linked Incentive (PLI) scheme. With the sale of the plant, the PLI benefits will be seamlessly transferred to the Tata Group.

Wistron's Challenges and Apple's Shifting Manufacturing Ecosystem

Wistron's decision to sell the plant stems from its struggles in managing supplies and inventory effectively. The company has also faced challenges in dealing with worker strikes related to pay parity.

Notably, Wistron will continue to serve as a contract manufacturer for iPhones globally and will manage repair services in India. The Wistron factory currently assembles the iPhone 14.

However, Tata Group will assume responsibility for fulfilling the commitment of shipping at least $1.8 billion worth of iPhones from the factory during the current financial year.

India's Growing Role in Apple's Manufacturing Landscape

Recently, Apple has been actively seeking to shift its manufacturing ecosystem away from China. The partnership between Apple and Tata Group aligns perfectly with this goal, contributing to a broader transition of Apple's manufacturing base to India. Industry estimates indicate that Wistron exported nearly $500 million worth of iPhones from India in the April to June period.

Apple's Rising Sales and India's Beneficial Schemes

Apple's sales in India have seen a remarkable surge, experiencing close to a 45% increase to $6 billion in FY23, reaching record highs. Notably, the company's exports from India are estimated to have exceeded $5 billion.

Tata Group's Prominence in Electronic Components Manufacturing

Tata Group's pivotal role in the Scheme for Promotion of Manufacturing of Electronic Components and Semiconductors underscores its significance in India's electronic manufacturing landscape.

Latest facts:

• Apple has been looking to move its manufacturing ecosystem out of China due to geopolitical tensions and rising costs. The partnership with Tata Group will help Apple achieve this goal and diversify its supply chain.

• The deal is also expected to create new jobs and boost the Indian economy. Tata Group has said that it plans to triple the workforce at the Wistron plant in the next few years.

• The acquisition is a major win for the Indian government, which has been trying to promote domestic manufacturing of electronic products. The government's PLI scheme has been instrumental in attracting investment and boosting production in the sector.

Conclusion:

Tata Group's acquisition of Wistron's manufacturing plant signifies a significant leap forward in India's smartphone manufacturing journey. The partnership reinforces India's standing as a credible hub for smartphone production, and India's transformative PLI scheme continues to be a driving force behind these industry developments.