Contract manufacturer Pegatron is in advanced talks to sell a majority stake in its iPhone manufacturing unit near Chennai to Tata Group, people aware of the matter told ET.
“The deal is expected to be completed in the coming two to three months, or, (at the) latest, by the second quarter of the fiscal year,” said one of the persons. “However, as of now, it’s unclear if this will be a Wistron-type buyout or a joint venture.” Both options are said to be on the table.
Wistron, like Pegatron and Foxconn, is a Taiwan-based contract manufacturer for Apple. Tata Group acquired its local operations for $125 million (Rs 1,000 crore) in November last year, becoming the first Indian company to manufacture iPhones.
Asked about the potential Tata acquisition, minister for electronics, IT and railways Ashwini Vaishnaw told ET, “Happy to note that Indian champions are emerging in mobile phone manufacturing. As the sector grows, more and more young citizens are finding new employment opportunities.”
A person in the know said the transaction amount is set to be lower than that for the Wistron deal.
Pegatron Smaller Than Wistron
This is because Pegatron is a smaller firm and there will be less than two years remaining under the production-linked incentive (PLI) scheme by the time the acquisition is completed.
Tata Group is expected to complete the deal through its subsidiary Tata Electronics, said one of the people cited above.
Experts said Apple may want the deal closed as soon as possible because it wouldn’t want any ownership confusion ahead of its annual launch. The company is set to introduce new iPhones in September, with production starting in June-August.
Tata Group, Pegatron and Apple didn’t respond to queries.
The Basket
Pegatron employs around 9, 500 people in India and makes some 4.5 million iPhones annually. The company started operations in the world’s second largest smartphone market in 2022.
It was among the three Apple contract manufacturers to be selected under the smartphone PLI scheme. However, Pegatron would be availing benefits for only four years as it started manufacturing a year later than Foxconn and Wistron. It had committed to invest Rs 1,132 crore between FY23 and FY25 under the PLI scheme.
Currently, Foxconn produces most of the iPhones in India.
Should the Tata deal close, Pegatron employees will move to the new entity, the people cited said.
Another person privy to the details said a potential Tata acquisition would be in line with Apple’s game plan to expand the ecosystem locally. “Apple follows the same strategy in China, wherein 90% of the suppliers are Chinese. Vietnam is different, as it does not have strong companies,” said the person.
Vietnam manufactures iPads and Mac personal computers, but not iPhones.
Home Front
Apple had brought the Taiwanese trio into India for manufacturing. But as the ecosystem develops, Indian companies are proving major players. “Not only iPhone production, but even components and sub-assemblies are being handled by Indian firms, thereby creating the whole ecosystem,” said an executive in the electronics industry.
Apple is building a large ecosystem of Indian suppliers to support the shift of a significant chunk of production from China, where most iPhones are currently made.
The supplier ecosystem is spread across Tamil Nadu, Karnataka, Uttar Pradesh, Andhra Pradesh and Haryana. Tata Electronics is one of the key component suppliers for Apple, making enclosures and other parts for iPhones at its Hosur facility.
The iconic US phone maker has been doubling down on India — the world’s second-largest smartphone market — amid geopolitical tensions and having witnessed a slump in the key US and China markets. For FY24, production of iPhones in India exceeded Rs 1 lakh crore by value as of February.
The iPhone SE was the first made-in-India iPhone produced by Foxconn in 2017. In subsequent years, all the latest Apple models were made here and even exported by Foxconn, Wistron and Pegatron.
