India’s Tata Group is reportedly in discussions with Taiwanese electronics manufacturer Pegatron to establish a joint venture, with the intention of co-managing the Apple iPhone assembly plant currently under construction in the southern state of Tamil Nadu. The partnership is anticipated to hasten the growth of iPhone production capacity in India.

According to Reuters citing industry sources, Tata, having acquired an iPhone assembly plant in the southern state of Karnataka from the Taiwanese company Wistron in 2023, has officially become part of the iPhone supply chain in India.

On the other hand, the new facility in the city of Hosur, Tamil Nadu, will be Tata’s second iPhone assembly plant in India, featuring 20 production lines, as disclosed by sources cited by Reuters.

Amid rumors that Tata Group in India is deeply engaged in discussions with Pegatron to form a strategic alliance and establish a joint venture, Pegatron did not to respond to market speculations.

Currently, approximately 10% of Apple’s iPhone production capacity in India comes from Pegatron, with the vast majority of capacity originating from Foxconn’s iPhone assembly plant located in Karnataka.

Furthermore, Foxconn has the highest share in Apple’s current new iPhone assembly. Among the four iPhone 15 series models, only certain models like iPhone15 and iPhone15 plus are produced by Tata Group in India.

An industry source has reportedly stated, “Tata cannot build everything from scratch,” He indicated that after Tata establishes a joint venture with Taiwanese firm Pegatron, Pegatron will provide technical and engineering support.

In recent years, Pegatron has been consistently expanding its global footprint, with expansions ongoing in Taiwan, Mexico, Indonesia, India, Vietnam, and other locations.

Regarding its operations in India, Pegatron announced in late October 2023 that it had invested approximately NTD 300 million (roughly USD 9.56 million) to secure leasing rights for factory premises in Tamil Nadu.

In January of this year, the Indian subsidiary announced signing a construction general contracting project to commence electromechanical engineering construction for a new plant, totaling approximately NTD 510 million (roughly USD 16.26 million). According to industry sources, Pegatron’s Indian facilities primarily focus on smartphone production at present.

(Photo credit: Apple)

On November 9th, EMS (Electronic Manufacturing Services) giant Wistron, through its Malaysian subsidiary WMMY, disclosed the successful completion of the sale of consumer electronics production facilities in the Selangor and Sungai Way Free Trade Zones.

The company is set to sell the properties, which include factories and land in these two free trade zones, to semiconductor major NXP for approximately 1.85 billion Malaysian Ringgit (equivalent to roughly USD 392million).

Wistron announced that its subsidiary WMMY (Wistron Technology Sdn. Bhd.) signed a “Letter of Offer to Purchase” with the unrelated entity NXP Malaysia Sdn. Bhd. According to Malaysian regulations, when buying or selling a property, the buyer can place a deposit and sign a preliminary contract with the seller.

However, within 14 business days, a formal sales agreement needs to be signed between the buyer and the seller for the transaction to be completed.

Wistron had declared through its subsidiary WMMY back in September of this year that it intended to divest its property (including factories and land) in the Selangor and Sungai Way Free Trade Zones in Malaysia in response to external economic changes and global strategic considerations.

At that time, the specifics of the transaction, including the counterpart and amount, were undetermined. The company had only established that the total transaction amount should not be less than 185 million Malaysian Ringgit (approximately 39.2 million USD). The deal presented by NXP aligns with these conditions, thus facilitating the progress of the factory sale.

Wistron has initiated several factory sales in recent years, including the iPhone assembly plants in Kunshan, China, and India, as well as the consumer electronics plant in Malaysia. The Kunshan facility was sold to Luxshare, a Chinese manufacturer, while the Indian plant was acquired by Tata Group, an Indian electronics corporation. The Malaysian plant, in this instance, is sold to the semiconductor giant NXP, and the transaction is projected to conclude within 14 days.

NXP currently operates six wafer fabs in the United States, the Netherlands, and Singapore, with four assembly and testing facilities situated in Taiwan, China, Thailand, and Malaysia.

The company specializes in producing application processors, communication processors, wireless connectivity SoCs, RF amplifiers, security system ICs, various analog products, and MCUs (microcontrollers).

Wistron’s manufacturing facility in Selangor, Malaysia, is mainly responsible for material fabrication, manufacturing, industrial engineering, production management, mechanisms, quality assurance, and production management.

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• [Insights] Tata’s Challenge in Securing Large iPhobe Orders After Officially Acquiring Wistron’s India Factory

(Photo credit: Wistron)

Wistron experienced a slowdown in shipments for product lines like PCs and displays in October, following the prior demand surge. However, their GPU-related AI server products continue to maintain their growth trajectory. Simultaneously, Wiwynn, a subsidiary of Wistron, witnessed a remarkable 20% month-over-month revenue increase due to the rising momentum in AI server-related project shipments, positioning them at the third-highest monthly revenue level in their history for the same period, reported by CTEE.

Both Wistron and Wiwynn hold an optimistic outlook for their AI server products, expecting the growth momentum to extend into the next year. In contrast, they foresee a return to growth trends for non-AI general-purpose servers and cloud data center servers next year, while AI server growth is expected to remain notably strong.

Wistron plays a pivotal role in the AI server supply chain and remains unaffected by high-end GPU shortages and U.S. export restrictions. Shipments in Q4 continue to exhibit consistent month-to-month growth, and the anticipated trend to peak in the second half of the year remains steadfast. Moreover, there are indications of a slight seasonal increase in general-purpose servers in Q4.

In a recent earnings call, Wiwynn maintains an optimistic stance for Q4 and the upcoming year. With the evident growth momentum from AI servers, they anticipate that developments in AI-related projects will lead to a continuous improvement in AI server product shipments.

Furthermore, Wiwynn’s third-largest customer business and AI server revenue both exceeded 10% in the third quarter, marking a significant milestone for the company. Back in October, Wiwynn had set up  a server plant in Malaysia to meet the surging demand for AI servers.

According to TrendForce’s anticipation, in 2023, the shipment of AI servers (including those equipped with GPUs, FPGAs, ASICs, etc.) is expected to exceed 1.2 million units, with a year-on-year increase of 37.7%, accounting for 9% of the total server shipments. In 2024, it is projected to further grow by more than 38%, with shipments reaching approximately 1.676 million units, and the share of AI servers will exceed 12%.
(Image: Wistron)

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According to Bloomberg’s report, Taiwanese company Wistron, previously one of Apple’s iPhone assembly suppliers in India, has agreed to sell its 100% stake in Wistron InfoComm Manufacturing (India) Private Ltd. to Tata Group for $125 million on October 27, 2023. Wistron will formally exit Apple’s supply chain, and Tata will become the first local iPhone assembly supplier in India.

TrendForce’s insights:

1. Apple Focuses on Indian Manufacturing as Wistron Exits iPhone Assembly Business

Amid international geopolitical risks, Apple has chosen to diversify its supply chain and production risks by shifting its iPhone assembly business from China to India. Apple’s decision to opt for India is primarily due to the fact that since 2015, India has become the fastest-growing regional market for smartphones globally.

Additionally, in recent years, the Indian government has actively worked to make India an attractive manufacturing and export hub for international companies. With strong government policy support and a vast domestic market, these factors have allured Apple to shift its production base here.

In the past, Wistron, along with Foxconn and Pegatron, was one of the three iPhone manufacturers for Apple in India. However, in 2020, there were reports of a riot at Wistron’s Indian factory, where thousands of Indian employees were dissatisfied with excessive working hours and unpaid wages. They vandalized the factory and even stole iPhones. This incident prompted Apple to initiate an investigation and ultimately led to a temporary suspension of its orders with Wistron.

Additionally, on July 17, 2020, Wistron announced the sale of its iPhone assembly plant located in Kunshan, China, to Luxshare Group. While this factory had an annual revenue that could exceed 100 billion yuan, its net profit margin was only 0.2%.

It can be inferred that the profit margins in the subcontracting business were inherently low, and following the riot incident at its Indian plant, Wistron may have lacked the bargaining leverage with Apple. Therefore, after considering all factors, it decided to sell its iPhone assembly plant in India.

2. Tata Group Takes Over India Manufacturing, But Expectations Are Low for a Significant Increase in Their Share of New iPhone Assembly

Currently, Wistron’s factory in Bengaluru is primarily responsible for assembling orders for the iPhone 14. To qualify for production subsidies from the Indian government, Wistron has committed to producing at least $1.8 billion (USD) worth of iPhones by March 2024.  After this transaction is completed, Tata Group will take over and fulfill this commitment.

Previously, Tata Group’s casing factory produced only one out of every two components that met Apple’s standards, indicating significant room for improvement in its yield rate. By examining the outsourcing production share table below, it is evident that Foxconn has the highest share in Apple’s current new iPhone assembly. Among these four models, only certain models like iPhone15 and iPhone15 plus are produced by Tata Group in India.

This suggests that Apple may be allocating the production of relatively less popular models to Tata Group for testing their yield rates. This decision may be due to the positioning of iPhone and Plus series products, coupled with their comparatively lower sales performance in recent generations. Apple is likely doing this until the production standards of the Indian outsourcing factory can be confirmed to meet 100% compliance.

Consequently, even though Tata Group’s acquisition of Wistron’s subcontracting factory is expected to expand its capacity, its share in new iPhone assembly is unlikely to significantly increase in the short term.

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• Tata Group to Become the Fourth iPhone Assembler as Production Relocation Accelerates

According to CTEE, NVIDIA’s forthcoming AI server, the GB200 (B100), slated for a 2024 release, has entered the certification phase in the supply chain. Recent market rumors suggest that Foxconn, originally intended to secure orders for the B100 board, faced certification challenges. As a result, Wistron has maintained its initial order share.

Additionally, it is worth noting that Ingrasys, a subsidiary of Foxconn, is actively manufacturing the H100 product and is a strong contender to secure orders.

Unofficial sources indicate that NVIDIA initially considered making Foxconn the second supplier for AI-GPU server baseboard in the upcoming B100 series. However, due to yield concerns and other factors, Wistron is still expected to receive 100% of the orders. Wistron has also capitalized on the opportunity to secure orders for the front-end AI-GPU module, which appears to be a successful move.

The rapid evolution of AI has intensified competition among assembly plants. Wistron and Foxconn play crucial roles as suppliers for NVIDIA’s current mainstream H100 series GPU modules and baseboards.

Wistron, as the exclusive supplier for H100 baseboards in the NVIDIA DGX and HGX architectures, also holds the exclusive role of providing mainboards and assembling AI servers for DGX. As shipments of the H100 series AI servers, built on the NVIDIA DGX and HGX frameworks, steadily increase in the latter half of the year, Wistron’s AI server-related product business shows consistent growth.

It’s worth noting that Ingrasys is responsible for manufacturing the H100. NVIDIA’s founder, Jensen Huang, and Foxconn’s Chairman, Young Liu, jointly attended a technology event, highlighted the close collaboration in between, underscoring Foxconn’s determination to secure B100 orders.

(Image: Wistron)