Apple Inc. (AAPL) has worked behind the scenes to push its manufacturing supplier, Foxconn Technology Company LTD. (FXCOF) to relocate some of its facilities from China.
The Taiwanese-owned Foxconn has reportedly invested $1 billion in India according to a Reuters report on July 10. Foxconn plans to expand a factory in its Sriperumbur plant in Tamil Nadu to alleviate some of the stresses that Apple has experienced in production with its Chinese locations.
The news follows developments that have come in light of Washington’s trade war with China and also the COVID-19 pandemic. Apple has opted to quietly shift its operations outside of China to avoid disruptions to its supply lines.
Apple and Foxconn would not corroborate the report but according to Reuters’ source they said, “There’s a strong request from Apple to its clients to move part of the iPhone production out of China.”
The investment and expansion in India is estimated to create near 6,000 jobs and will take place over three years. Apple currently houses a separate manufacturing plant in India for mobile devices that are sold to China Xiamoi Corp.
In an interview with India’s Zee News, Neil Shah of Hong Kong-based tech researcher Counterpoint said, “With India`s labor, cheaper compared with China, and the gradual expansion of its supplier base here, Apple will be able to use the country as an export hub.”
Last month, India launched a $6.65 billion plan to offer incentives to smartphone makers to plant or expand its manufacturing in the country.
Apple is Foxconn’s largest contract, serving computer and mobile devices to the company for nearly 20 years. In Q1 Foxconn’s earning took a 90% slide in light of COVID-19. Foxconn chairman Young-Way said on May 15 that “the visibility of our outlook for the whole year is limited. Right now, there is no way I can offer the outlook for the latter half of this year.”
While Foxconn has largely restored its operations, Apple still managed to report a profit in light of the pandemic. The company’s fiscal 2020 second-quarter revenue was $58.3 billion which was an increase in revenue of 1% from the previous year’s quarter.
Deutsche Bank analyst Jeriel Ong focused on Apple’s rapid growth during the pandemic saying on July 8, “It seems that AAPL is reaching all-time highs every week, and that has us nervous.” With instability in the world, where Apple is the largest company, he added that Apple’s “quick rise has some investors a bit anxious.” Nevertheless, he maintained his Buy rating on Apple’s stock and raised the price target from $380 to $400, suggesting upside potential of 4%.
So far, Apple is up 30% year-to-date with 26 analysts assigning a Buy rating, 6 Hold, and 1 Sell, which altogether results in a consensus of a Strong Buy. The average analyst price target stands at $355.52 which implies a downside potential of 7%. (See AAPL stock analysis on TipRanks).
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