Recently China imposed restrictions on the movement of its engineers and technicians working in Foxconn’s Indian facilities, along with curbs on exports of specialised manufacturing equipment.

Geopolitical Strategy of China

• Strategic Reason: China holds a near-monopoly in specialized equipment and advanced manufacturing capabilities. 
  • By leveraging this dominance, China aims to maintain its control over global supply chains and influence competing economies like India.
• Objective of the Restrictions: China’s restrictions on its engineers traveling to India aim to prevent knowledge transfer to Indian counterparts.
  • This tactic slows down the development of India’s high-tech manufacturing sector, delaying its progress in electronics and semiconductor industries.
  • Limited access to Chinese expertise and equipment could delay India’s production timelines in sectors like smartphones, semiconductors, and electric vehicles.
• Diversifying of Manufacturing Bases : The ‘China Plus One’ strategy has led global companies to diversify their manufacturing bases beyond China. Nations like India, Vietnam, and Mexico are emerging as attractive alternatives due to:
  • Lower labor costs
  • Government incentives
  • Reduced geopolitical risks
• Strategic Reminder to Global Firms: By restricting exports and expertise, China signals its continued dominance in the electronics industry.

Role of Foxconn and Apple in India’s Manufacturing Goals

• Manufacturing Shift to India: In 2023, Apple’s decision to assemble the iPhone 15 at Foxconn’s facility in Tamil Nadu and Tata Electronics’ facility in Karnataka marked a major milestone in India’s electronics manufacturing sector.
• India’s Growing Role: By the fiscal year ending March 2024, India assembled $14 billion worth of iPhones through Foxconn, Pegatron, and Tata Electronics. 
  • This production scale underscored India’s emergence as a key global manufacturing hub for Apple.

India’s Response to China’s Restrictions

• Production Linked Incentive scheme : India is committed to expanding its electronics sector, with a strong focus on the Production-Linked Incentive (PLI) scheme. 
  • Launched in 2020, the PLI scheme offers financial incentives to boost local manufacturing of mobile phones and electronic components.
  • The primary goals of the scheme include attracting global tech giants like Apple and Foxconn.
• Increased Funding: The Indian government has progressively increased funding for the PLI scheme:
  • 2024: ₹6,125 crore ($0.70 billion)
  • 2025: ₹8,885 crore ($1.02 billion)
• Removal of Customs Duties: The Union Budget 2025 removed basic customs duties/import taxes on key mobile phone components such as printed circuit boards, camera modules, connectors, and sensors and capital goods/machinery used in lithium-ion battery manufacturing for mobile phones.
• Impact on Foreign Investments:  For companies like Foxconn, the scheme provides direct incentives to expand operations in India.
• Recent Diplomatic Developments: In October 2024, India and China reached a patrolling agreement to ease military tensions in eastern Ladakh, marking an end to a four-year-long border standoff. 
  • Despite the diplomatic thaw, China imposed restrictions on exports of specialized manufacturing equipment to India.

Way Forward

• Leveraging Corporate Influence : Given the stakes of Apple and Foxconn in both India and China, their involvement could play a key role in negotiating with Beijing to ease restrictions on specialized equipment and components.
• Holistic Manufacturing Ecosystem: India remains primarily a final assembly hub rather than a full-fledged electronics manufacturing powerhouse. 
  • To reduce reliance on imports, domestic production of components and machinery must be incentivized through policy measures. 
  • Scaling up ancillary industries is crucial to ensure a self-sufficient electronics supply chain.
• National Manufacturing Mission: The National Manufacturing Mission, announced in the Union Budget, is a step in the right direction but requires:
  • Stronger financial backing to develop technology-sharing clusters.
  • Skill development initiatives focused on industry-specific expertise rather than just on-the-job training.
• Encouraging Private Capital: Private investments must be encouraged to develop domestic contract manufacturers, reducing reliance on foreign corporations.
  • A robust network of Indian manufacturers will not only serve global firms but also strengthen domestic brands, fostering greater self-reliance.
• Technology Clusters:  A thriving tech hub is often an attractive destination for global investments, as investors prefer clusters with established infrastructure, skilled talent pools, and a robust ecosystem of suppliers and customers.

Conclusion

By addressing these structural gaps, India can future-proof its electronics industry, mitigate supply chain risks, and emerge as a truly competitive global manufacturing hub.

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