Foxconn Technology is in talks to manufacture Apple's iPhone in India, government officials said, in a move that could lower prices in the world's No.3 smartphone market where the U.S. firm trails Samsung Electronics and local players.
India could help Foxconn mitigate accelerating wage inflation in China, where it makes the majority of iPhones, and base production sites closer to markets where its key clients want to grow.
Lower production costs could also help Foxconn keep hold of Apple orders amid intensifying competition with nimble manufacturing rivals such as Quanta Computer Inc.
"Foxconn is sending a delegation of their officers to scout for locations in a month's time," Subhash Desai, Industries Minister of India's western state Maharashtra, told Reuters.
Foxconn has said it is aiming to develop 10-12 facilities in India, including factories and data centres, by 2020, but had given no detail.
The Taiwan-based tech giant, the world's largest contract maker of electronic products, declined to comment on detailed plans on Thursday, citing commercial sensitivity.
Desai said Foxconn had yet to make any firm commitment, but he said the group was looking to manufacture iPhones, iPads and iPods, both for domestic as well as global sales.
Apple representatives in India did not respond to a request for comment on Thursday. Apple's iPhone 6 with 16 GB sells for around 44,000 rupees ($687.82) in India, versus Samsung's Galaxy S6 with 32 GB which sells for around 40,000 rupees ($625.29).
It has 10% market share in India, trailing Samsung and local manufacturers such as Micromax, which dominate the market, according to Counterpoint Research Market Monitor.
Make in India
A return of Foxconn which was forced to shut up shop in India last year after client Nokia closed -- would be a major victory for India, which badly needs to turn its tech boom into a manufacturing and employment boost.
India, under Prime Minister Narendra Modi, has sought to reboot manufacturing, but the country is yet to rival China, particularly in technology where most factories will likely be assembly units to begin with.
But local businessmen are betting that as global companies invest in the country, suppliers will follow.
A lack of good infrastructure and suppliers are the biggest hurdles to making technology products in the country, forcing most of India's more than 100 different phone companies to get their products from the mature markets of China and Taiwan.
Apple is among the biggest clients for Foxconn the trade name for Hon Hai Precision Industry Co Ltd -- which also makes components for companies such as Xiaomi, Acer and Sony.
"The smartphone boom in India indicates the time is just right to focus on expansion plans and increasing volume in India to a comparable level with the China market in the next five years," said Sky Li, vice president of phone manufacturer OPPO.
India has the second-highest number of mobile phone accounts behind China. According to networking solutions company Cisco Systems, there will be 650 million smartphones in the country by 2019. The number of tablets will rise 9 percent to 18.7 million by then.