Tata's In Talks To Acquire Majority Stake In Pegatron's iPhone Unit Near Chennai; Don't Miss Out On Details

Contract manufacturer Pegatron is reportedly in advanced negotiations to sell a majority stake in its iPhone manufacturing unit located near Chennai to the Tata Group. According to ET sources, the deal is poised to be finalized within the next two to three months, with possibilities ranging from a complete buyout akin to the Wistron deal or a potential joint venture.

Wistron, another Taiwan-based contract manufacturer for Apple, saw its local operations acquired by the Tata Group for $125 million (Rs 1,000 crore) back in November, marking a milestone as the first Indian company to venture into iPhone manufacturing. Minister for Electronics, IT, and Railways, Ashwini Vaishnaw, expressed his optimism regarding the emergence of Indian champions in mobile phone manufacturing, highlighting the sector's potential for generating new employment opportunities.

Given Pegatron's relatively smaller stature compared to Wistron, experts anticipate the transaction amount to be lower, compounded by the fact that there will be less than two years remaining under the production-linked incentive (PLI) scheme upon completion of the acquisition. Tata Group is expected to spearhead the deal through its subsidiary Tata Electronics.

Apple's eagerness to streamline ownership clarity ahead of its annual iPhone launch in September adds urgency to the negotiations. Pegatron, Tata Group, and Apple have refrained from commenting on the matter when approached for queries.

Pegatron currently employs approximately 9,500 individuals in India and churns out around 4.5 million iPhones annually. Despite its late entry into the Indian smartphone market in 2022, the company was among the select few Apple contract manufacturers chosen under the smartphone PLI scheme. Notably, Foxconn presently dominates iPhone production in India.

Should the acquisition materialize, Pegatron employees are poised to transition to the new entity. This move aligns with Apple's strategy to bolster its local ecosystem, akin to its approach in China where a majority of suppliers are domestic. Vietnam, on the other hand, focuses primarily on manufacturing iPads and Mac personal computers, leaving iPhones out of its production scope.

Apple's emphasis on building a robust supplier ecosystem in India reflects its intent to diversify production away from China, where it currently manufactures most iPhones. Indian companies are increasingly becoming pivotal players in this ecosystem, handling not just iPhone production but also components and sub-assemblies, thereby nurturing a comprehensive manufacturing framework.

The supplier ecosystem spans across various Indian states, including Tamil Nadu, Karnataka, Uttar Pradesh, Andhra Pradesh, and Haryana. Tata Electronics, one of Apple's key component suppliers, operates out of its Hosur facility, manufacturing enclosures and other parts for iPhones.

Amid geopolitical tensions and market shifts, Apple has intensified its focus on India, the world's second-largest smartphone market. For FY24, iPhone production in India surpassed Rs 1 lakh crore by value as of February. The inception of the iPhone SE as the first made-in-India iPhone by Foxconn in 2017 marked the beginning of an important transformation in Apple's manufacturing landscape, with subsequent models also being produced and exported from India by Foxconn, Wistron, and potentially Pegatron in the near future.