The Tata Group, one of India’s largest conglomerates, is in advanced negotiations with Taiwanese firm Pegatron to take control of its sole iPhone manufacturing facility in India. According to two sources with direct knowledge of the matter, the deal, which has received Apple’s backing, would see Tata hold a majority stake in a joint venture that will operate the Pegatron plant near Chennai city in Tamil Nadu.
Pegatron’s Scaling Back of Apple Partnership:
The potential handover of the Chennai facility marks Pegatron’s latest move to scale back its partnership with Apple. The Taiwanese firm had previously forfeited control of an iPhone plant in China to rival Luxshare in a $290 million deal last year. The Pegatron India factory, which employs around 10,000 workers and produces 5 million iPhones annually, is the last such facility operated by the company.
Tata’s Growing Presence in iPhone Manufacturing:
For Tata, acquiring the Chennai Pegatron plant will bolster its iPhone manufacturing plans in India. The conglomerate already operates an iPhone assembly plant in the neighboring state of Karnataka, which it took over from Taiwan’s Wistron last year. Additionally, Tata is constructing another facility in Hosur, Tamil Nadu, where Pegatron is likely to become its joint venture partner.
Details of the Joint Venture:
Under the proposed deal, Tata plans to hold at least a 65% stake in the joint venture through its Tata Electronics unit, with Pegatron providing technical support and holding the remaining share. The talks between the two companies are expected to close within six months, and all Pegatron India employees will be transferred to the joint venture entity. The deal also includes the takeover of another iPhone factory that Pegatron has been building at its Chennai campus.
Apple’s Diversification Strategy:
Apple’s support for the Tata-Pegatron deal aligns with the tech giant’s efforts to diversify its supply chain beyond China amid geopolitical tensions between Beijing and Washington. India is becoming increasingly important for Apple, with analysts estimating that the country will contribute 20-25% of total iPhone shipments this year, up from 12-14% last year. Tata, along with Pegatron and Foxconn, is a key player in Apple’s growing ambitions in India.
Pegatron’s Gradual Withdrawal:
The reasons behind Pegatron’s gradual withdrawal from its Apple business, including in India, remain unclear. Last year, the company stated that the China plant deal was done to raise capital to “optimise its business.” The potential handover of the Chennai facility to Tata marks another step in Pegatron’s apparent shift away from its Apple partnership.
The advanced talks between Tata and Pegatron for the takeover of the iPhone manufacturing facility in Chennai highlight the changing dynamics in Apple’s supply chain and the growing importance of India as a production hub. With Tata set to hold a majority stake in the joint venture and Pegatron providing technical support, the deal has the potential to significantly boost Tata’s presence in the iPhone manufacturing landscape. As Apple continues to diversify its supply chain and India’s contribution to iPhone shipments grows, the Tata-Pegatron partnership could play a crucial role in shaping the future of Apple’s manufacturing strategy in the region.
