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Apple urges India to revise tax law that could hinder its expansion plans

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Apple is lobbying the Indian government to amend an income tax law that could expose the company to billions in additional taxes over equipment ownership, according to sources familiar with the matter. The U.S. tech giant seeks to ensure it is not taxed for owning high-end iPhone assembly machinery used by its contract manufacturers, such as Foxconn and Tata, as it ramps up production in India.

The push comes as Apple expands its footprint beyond China, where it traditionally owns production equipment but faces no tax liability. Under India’s 1961 Income Tax Act, however, such ownership would create a “business connection,” potentially subjecting Apple’s global iPhone profits to Indian taxes.

Executives have held discussions with Indian officials in recent months to seek changes to the law, warning that current regulations could stall future growth. “If the legacy law is changed, it will become easy for Apple to expand … India can become more competitive globally,” one industry source said.

India’s government is cautiously reviewing Apple’s request, balancing its need for foreign investment with the protection of its taxation rights. A senior official said talks are ongoing, calling it “a tough call,” but added that India “needs investments” and aims to find a workable solution.

Analysts note that specialized iPhone assembly equipment can cost billions of dollars — far beyond what local manufacturers can finance — underscoring the urgency of Apple’s appeal. The lobbying highlights the stakes as India seeks to position itself as a global smartphone manufacturing hub while maintaining fiscal sovereignty.

India downplays Foxconn disruption from Chinese staff pullback

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India’s government said Foxconn’s operations in the country remain largely unaffected despite the company recalling some of its Chinese engineers and technicians in recent months.

S. Krishnan, secretary at the Ministry of Electronics and Information Technology, told reporters in Taipei that Foxconn had managed the adjustment smoothly, relying on staff from Taiwan, the U.S., and local Indian workers to keep production stable. “Operations did not really suffer significantly,” he said.

Foxconn, Apple’s top iPhone assembler, has been expanding in India as part of efforts to diversify production away from China, particularly amid the risk of triple-digit U.S. tariffs on Chinese goods. The company already runs a plant near Chennai and is building another near Bengaluru.

Bloomberg previously reported that hundreds of Chinese employees were asked to return home, though the reasons remain unclear. Both Foxconn and Apple declined to comment.

The backdrop includes lingering India-China tensions since their 2020 border clash, which led New Delhi to tighten restrictions on Chinese firms and ban dozens of Chinese apps. Relations have warmed somewhat, with Indian Prime Minister Narendra Modi meeting President Xi Jinping last month in Beijing for the first time in seven years.

Krishnan emphasized that Foxconn is “committed to see through all the investments in India,” noting its expansion has been “very significant.”

Foxconn Sees AI Driving Growth as Q2 Profit Exceeds Forecast

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Foxconn (2317.TW), the world’s largest iPhone assembler, reported second-quarter net profit of T$44.4 billion ($1.48 billion), surpassing the consensus estimate of T$38.8 billion, as strong demand for AI servers helped offset slower growth in smart electronics. The company on Thursday forecast a significant rise in third-quarter revenue, with AI server sales expected to jump more than 170% year-on-year.

Cloud and networking products, including servers, accounted for 41% of Q2 revenue, while smart consumer electronics contributed 35%. CEO Kathy Yang said, “AI has been the primary growth driver so far this year,” but cautioned that “close attention is needed due to the impact of changes in tariffs and exchange rates.”

Foxconn is increasing capital spending by more than 20% in 2025 to expand server production capacity at its facilities in Texas and Wisconsin. The company’s AI business benefits from rising demand as cloud computing giants such as Amazon (AMZN.O), Microsoft (MSFT.O), and Google (GOOGL.O) expand AI infrastructure.

Geopolitical uncertainty remains a risk, particularly from U.S.-China trade tensions, although a 90-day tariff truce has been extended. While most iPhones for Apple (AAPL.O) are assembled in China, production for the U.S. market has shifted mainly to India. Foxconn is also building factories in Mexico and Texas to manufacture AI servers for Nvidia (NVDA.O).

In its electric vehicle (EV) operations, Foxconn sold its former Lordstown, Ohio, factory for $375 million but will continue to occupy the site to produce cloud-related products. Initial production of its Model C EV for the U.S. market will take place in Taiwan.

Foxconn shares have risen 8.4% year-to-date, outperforming the broader Taiwan index (.TWII), which gained 5.2%, and closed up 0.5% on Thursday ahead of the earnings release.