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Exclusive - Pegatron in talks with Tata to sell its only India iPhone plant, sources say

FILE PHOTO: People are seen outside the main gate of the Pegatron facility near Chennai

By Munsif Vengattil and Aditya Kalra

BENGALURU/NEW DELHI (Reuters) - Pegatron is in advanced talks to hand over control of its only iPhone manufacturing facility in India to the Tata Group, said two sources with direct knowledge, marking the Taiwanese firm's latest scale back of its Apple partnership.

Under the deal, which has received the backing of Apple, Tata plans to hold at least a 65% stake in a joint venture that will operate the Pegatron plant near Chennai city in the southern Indian state of Tamil Nadu, with the Taiwanese firm providing technical support and holding the rest, one of the sources said.

Tata, one the largest conglomerates in India, will operate the joint venture through its Tata Electronics unit, the second source said.

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The Pegatron India factory has around 10,000 employees and makes 5 million iPhones annually. It is the last such facility operated by the firm after it forfeited control of an iPhone plant in China last year to rival Luxshare in a $290 million deal.

Tata and Pegatron did not respond to emailed requests for comments. Apple declined to comment. The sources did not share financial details of the ongoing negotiations.

Apple is increasingly looking to diversify its supply chain beyond China amid geopolitical tensions between Beijing and Washington. For India's Tata, the Chennai Pegatron plant will bolster its iPhone manufacturing plans.

Tata already operates an iPhone assembly plant in the neighbouring southern state of Karnataka, which it took over from Taiwan's Wistron last year, and is also building another in Hosur in Tamil Nadu, where Pegatron is likely to emerge as its joint venture partner.

Pegatron has for months also been building another iPhone factory at its Chennai campus, and the Tata deal talks include taking over that facility as well, the first source said.

The talks between Tata and Pegatron for the factory are expected to close in six months and will see all of the Pegatron India employees move to the joint venture entity, the first source added.

Apple's iPhone contract manufacturers in India currently include Tata, Pegatron and Foxconn. Tata is key to Apple's growing ambitions in India, which analysts estimate will contribute 20-25% of total iPhone shipments this year, from 12-14% last year.

The reasons for Pegatron's gradual withdrawal from its Apple business, including in India, were not known. Last year, Pegatron said the China plant deal was done to raise capital to "optimise its business".

(Reporting by Munsif Vengattil in Bengaluru and Aditya Kalra in New Delhi; Additional reporting by Ben Blanchard)