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Foxconn's focus shift, India preference cause concerns in China

tech Updated: Aug 11, 2015 08:35 IST

The logo of Foxconn, the trading name of Hon Hai Precision Industry, is seen on top of the company's headquarters in Tucheng, New Taipei city. (Reuters Photo)

Taiwanese firm Foxconn's decision to invest a whopping $5 billion in India has caused unease in China as it marks the first top international firm opting for India amid a slowdown in the Chinese economy.

"Foxconn chooses India over China for new plant," read the headline in state-run, while carrying the news of the Taiwanese electronic giant signing up to set up a big plant in Maharashtra.

"Foxconn's latest India investment represents the leading electronic product maker's intention to profit from the world's fastest expanding market of smartphones. Foxconn, famous for making parts for Apple, will reportedly produce Xiaomi phones in the new factory, a rumour that Foxconn authorities did not clarify or comment," it said.

Joining Prime Minister Narendra Modi's Make in India initiative, China's Xiaomi Inc has tied up with Foxconn to assemble smartphones in India as it looks to grab a larger share of the booming Indian market.

The tie-up, which will make India Xiaomi's second local manufacturing hub outside China, comes within days of Foxconn announcing $5 billion investment for a plant in Maharashtra.

Despite the bad publicity over suicides in the past by Chinese employees owing to pressure and poor working conditions, China valued Foxconn's massive presence as it employed over a million workers, who mostly hailed from rural areas with little education.

Foxconn converted China the leading base for manufacturing of all top brands of phones and computers including Apple, Samsung, Dell etc.

It will be the first leading investor to show interest to shift to India.

"The Foxconn-India deal also shows that India wishes to develop its manufacturing sector, as the rising labor cost in China is forcing away many investments in lower-end and labor-intensive industries," the report said.

"At the same time, the Chinese government is encouraging its companies to take the opportunities brought by the "Beltand Road" initiatives, and to invest overseas, a move which also helps absorb excessive industrial capacity back home," it said.

China's growth stood at 7% in the first half of the year with forecasts that it would slow down further.

The slowdown is causing concern as the world's second largest economy which posted double digit growth rates for over two decades attracted massive foreign direct investment, (FDI).

The International Monetary Fund (IMF) in its recent forecast said China's economy will slowdown to 6.8% this year followed by 6.3% in 2016 and 6% for 2017.