Foxconn Technology Group, the major assembly partner of US tech giant Apple Inc., has recalled around 300 Chinese engineers from its plant in Tamil Nadu, Bloomberg reported citing sources. The move will likely pose a setback for Apple’s expansion push in India, it added.

As per the sources, Foxconn is replacing 300 of its Chinese engineers with engineers from Taiwan at the Yuzhan Technology component unit in Tamil Nadu. This is the second time, it has done so, they added.

Spokespeople for Apple and Foxconn did not respond to queries, as per the report.

Why has Foxconn recalled Chinese engineers?

Notably, the move comes after China verbally encouraged local governments and regulatory agencies to limit technology transfer and equipment exports to India and Southeast Asia. This has been viewed as a way to stifle a manufacturing shift to these countries, away from China.

The report cited an Economic Times report that Chinese staff at the Yuzhan facility were leaving; and Bloomberg in July also reported that Foxconn had asked multiple Chinese engineers and technicians to leave the Indian iPhone facilities and return home.

How will this impact Apple’s iPhones?

According to the report, Apple’s iPhone is likely to see the highest impact from this move as the Yuzhan factory makes metal cases (known as enclosures), and display modules for older iPhone models. The facility began production just months ago, and has not yet begun working on the latest iPhone 17 line as yet. Apple still imports a bulk of its displays, the sources added.

Apple can, for the time being, increase its imports of display, besides lean on other local suppliers for enclosures. But the removal of experienced Chinese staff threatens to dent it’s efforts to rapidly localise its India supply chain, it noted.

Key factors: Apple in India, India-China relationship

The report added that Apple has taken a conscious decision to work with Indian suppliers and hasn’t brought in any significant Chinese partners to the South Asian country. Locally, it has increasingly relied on conglomerate Tata Group’s electronics manufacturing arm — the only Indian iPhone assembler.

However, while the Chinese suppliers have built iPhones for nearly two decades, Indian suppliers sometimes still go through teething problems.

There is not all bad news for Apple, improving relationship between India and China could offer Apple (and other auto makers and local manufacturers), a reprieve. China has assured India of supplies of rare earth minerals and tunnel-boring machines but discussions are yet to bear results.

Apple is producing all four iPhone 17 models in India ahead of their debut in September, marking the first time that all new variations — including pro-level versions — will ship from the South Asian country from the get-go.

(With inputs from Bloomberg)