Foxconn, a Taiwanese contract manufacturer, has won an order to manufacture Apple Inc's AirPods and plans to build a factory in India to produce the wireless earphones, according to two people with direct knowledge of the matter.
Foxconn, the world's largest contract electronics manufacturer and assembler of roughly 70% of all iPhones, will become an AirPod supplier for the first time, highlighting the company's efforts to diversify production away from China. AirPods are currently manufactured by a number of Chinese companies.
According to one source, Foxconn will invest more than $200 million in the new India AirPod plant in Telangana, a southern Indian state. The value of the AirPod order was not immediately clear.
The person, who requested anonymity because the matter was not yet public, said Foxconn officials debated whether to assemble AirPods for months due to the device's relatively lower profit margins, but ultimately decided to go ahead with the deal to "reinforce engagement" with Apple.
"That way, we are more likely to receive orders for their new products," the individual explained.
According to the source, Apple requested the decision to establish production in India.
To win more orders from Apple, the world's most valuable company, Foxconn competes with Taiwanese rivals such as Wistron Corp and Pegatron Corp.
According to the person, Foxconn Interconnect Technology Ltd, a subsidiary, plans to begin construction of a manufacturing facility in Telangana in the second half of this year and begin production by the end of 2024 at the earliest.
A second person with direct knowledge of the situation, who also declined to be identified because the information was not yet public, stated that the Foxconn subsidiary will manufacture AirPods in India without providing further details.
Analysts have previously said Apple has asked suppliers including Foxconn to make AirPods in India, but details such as the size of investment, timeline and which suppliers have manufacturing plans in the country have not been disclosed.
Foxconn has refused to comment. Apple did not immediately respond to a request for comment.
Apple and its key suppliers have been shifting production away from China, where strict COVID-19 curbs disrupted 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.
Foxconn announced on Wednesday that it would increase its investment outside of China in order to meet customer demand and reduce its reliance on China for production.
It was unclear whether Foxconn's production plans would affect current AirPod suppliers, such as Luxshare Precision Industry.
Luxshare did not respond immediately to a request for comment.
Another supplier, Goertek Inc, said in November that an overseas client had asked it to halt assembly work on a smart acoustic product, which analysts at the time identified as AirPods Pro 2, and that the halt would reduce revenue by up to 3.3 billion yuan ($480 million).