Why India's electronics manufacturing is about to get a boost
What's the story
The recent thaw in India-China relations could smoothen the path for joint ventures (JVs) between Indian electronics manufacturers and Chinese component suppliers. This development is viewed positively amid ongoing trade tensions between New Delhi and Washington, as per industry experts. These partnerships are seen as crucial for boosting domestic manufacturing in areas like printed circuit boards (PCBs), display modules, camera sub-assemblies, and batteries.
Pending proposals
EMS companies have pending proposals
A number of Electronics Manufacturing Services (EMS) companies have proposals pending with the Indian government, including technology-transfer deals with Chinese partners. This is despite India's 2020 FDI policy, which mandates the clearance for investments from countries sharing a land border. A senior executive at an EMS firm said they are awaiting approvals for planned JVs with leading Chinese companies as the situation has improved recently.
Policy perspective
Government wants technology transfer with Chinese investments
Another industry executive said the Indian government wants any Chinese investment to be accompanied by a technology transfer. They stressed that the success of the new component policy depends on the participation from Chinese vendors in key categories. Amber Enterprises Chairman and CEO Jasbir Singh also noted signs of easing in areas like surface-mount technology, hinting at a gradual improvement in relations between India and China.
Strategic importance
MeitY views certain Chinese investments as critical
The Ministry of Electronics and IT (MeitY) sees certain Chinese investments as critical to India's manufacturing goals, and the success of the upcoming Electronics Component Manufacturing Scheme (ECMS). NITI Aayog has also suggested allowing Chinese firms to hold up to 24% in Indian companies without additional scrutiny. This push comes ahead of Prime Minister Narendra Modi's visit to China later this month for the Shanghai Cooperation Organisation (SCO) Summit.
Supply chain reliance
India cannot overlook China's role in global supply chain
A senior government official stressed that India cannot overlook China's role in the global supply chain, especially in electronics manufacturing. Tarun Pathak, Research Director at Counterpoint, said India's approach seems to be a strategic recalibration. He expects more JVs and tech transfers in the PCBs, display modules, camera sub-assemblies and batteries in the coming years despite potential friction with the US.
Financial commitment
ECMS allocated ₹22,919cr to incentivize domestic component production
The Indian government has allocated ₹22,919 crore under the ECMS to incentivize domestic component production. Industry executives say Chinese expertise is critical given their dominance in global component manufacturing. Dixon Technologies and Bhagwati (Micromax) already have JV agreements with Chinese firms pending approval. Dixon recently got clearance for a JV with Longcheer, where it will hold 74% and the Chinese partner 26%.