Foxconn, Dixon urge India to pay pending production subsidies

Apple Inc. supplier Foxconn Technology Group and Dixon Technologies India Ltd. are asking India to pay them billions of rupees in subsidies they think they are entitled to under the government’s production incentives program.

The government pledged a total of 410 billion rupees ($4.8 billion) in subsidies to manufacturers, and part of that remains unallocated because some companies didn’t meet estimated production targets. Foxconn and Dixon argue that, according to the program rules, they are eligible for some of the unallocated funds, people familiar with the matter said.

Foxconn could get as much as 6 billion rupees and Dixon 1 billion rupees if the government releases the funds, the people said, asking not to be identified as the matter isn’t public. The government is reviewing the two requests, the people said.

Representatives of Foxconn, Dixon and India’s technology ministry didn’t respond to requests for comment.

Prime Minister Narendra Modi’s production-linked subsidy plan set annual value-based thresholds for global and local electronics firms, capped at certain levels. The project also envisaged that any unused subsidies, resulting from some companies failing to produce enough to hit their caps, would be allocated to the remaining eligible applicants that exceeded theirs.

Foxconn’s roughly 300 billion rupees of iPhone production in the fiscal year through March 2023 exceeded its cap of 200 billion rupees. And Dixon’s production of 80 billion rupees in the fiscal year through March 2024 surpassed its cap of 60 billion rupees.

While the amount of money at stake in the unallocated funds debate is relatively small, it’s an important test of Modi’s industrial policy ambitions. Companies want to see the administration follow through on regulations that have led to significant investments, including Apple partners assembling $14 billion of iPhones locally last fiscal year as they diversify beyond China. South Korea’s Samsung Electronics Co. has also levered the plan to step up exports.

The stability of Indian policy making becomes even more important as India tries to woo chipmakers and tech giants such as Microsoft Corp. plan to invest billions in the world’s most populous country to expand cloud computing and artificial intelligence.

Read more: Microsoft’s Nadella Pledges $3 Billion India AI Investment

To be sure, the Modi administration regularly releases subsidies within the cap to all companies participating in the drive.

In contract manufacturer Dixon’s case, the government is also reviewing whether the supplier made new investments for producing Xiaomi Corp.’s smartphones or whether machines were merely shifted out of another factory which previously assembled the Chinese brand’s devices, one of the people said. Xiaomi has lost ground to rival smartphone makers in India that’s led to lower production of its devices, which further complicates the handing of funds meant to boost smartphone output.