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China imposed export restrictions on critical materials such as gallium, germanium, and antimony, essential for semiconductors and defense technologies. This action underscores the vulnerabilities in global supply chains and challenges India’s manufacturing ambitions, given the $57.83 billion trade deficit with China during April-October 2024. 

China’s Restrictions and Global Supply Chain Vulnerabilities

• Skilled Workforce Disruption: China’s travel ban on engineers has created a knowledge gap, slowing production efficiency and technology transfer.
  For example: Foxconn had to replace Chinese engineers with Taiwanese workers, affecting assembly line productivity and knowledge transfer.
• Monopoly on Equipment: China’s control over specialized machinery exports hinders India’s electronics production, delaying product launches and impacting supply chains.
  For example: The curbs on specialized Foxconn machinery disrupted iPhone 16 Pro assembly in India.
• Dependence on Chinese Components: India relies heavily on China for key smartphone parts like circuit boards and camera modules, making domestic production vulnerable.
  For example: 75% of mobile components used in India are imported, with China as the primary supplier.
• Impact on Global Firms: China’s actions disrupt Apple’s India expansion, forcing firms to reconsider their diversification under ‘China Plus One.’
• Trade Negotiation Leverage: By restricting supply chains, China seeks to retain its dominance, influencing trade negotiations on favorable terms.

Balancing Manufacturing Ambitions and Economic Interdependence

• Supply Chain Diversification: Expanding supplier networks beyond China by sourcing from Vietnam, Taiwan, South Korea, and Japan ensures resilience.
  For example: PLI scheme incentives attract global suppliers to set up operations in India.
• Strengthening Domestic Industry: Developing local component industries reduces reliance on Chinese imports and enhances resilience.
  For example: The National Manufacturing Mission supports small and medium enterprises in electronics production.
• Foreign Investment Attraction: Encouraging Taiwanese and Western firms to manufacture critical parts in India reduces dependency on China.
  For example: Tata Electronics’ partnership with Apple is a step toward localized component manufacturing.
• Strategic Trade Diplomacy: Engaging in negotiations with China and leveraging multinational corporations like Apple can ease restrictions.
  For example: Apple and Foxconn’s involvement in negotiations could help ease China’s export curbs.
• Investment in R&D: Focusing on indigenous research and innovation ensures long-term technological self-sufficiency.
  For example: ISRO’s indigenous cryogenic engine development shows India’s ability to overcome technology denials.

Role of Domestic Capacity Building and International Partnerships

• Workforce Development: Industry-specific training programs in chip design, robotics, and automation will enhance workforce competence.
  For example: PLI beneficiaries must train Indian engineers to bridge skill gaps left by foreign workers in India.
• Semiconductor and Component Ecosystem: Encouraging semiconductor fabs and component plants will localize critical supply chains.
  For example: Vedanta’s semiconductor plant in Gujarat is a step towards chip self-sufficiency.
• International Tech Collaborations: Strengthening ties with the US, Japan, and the EU can facilitate technology transfer and supply chain resilience.
  For example: India-US CHIPS Act collaboration can boost semiconductor manufacturing.
• Promotion of Indigenous Brands: Supporting Indian brands like Lava and Micromax will reduce dependency on foreign contract manufacturers.
  For example: Government incentives for Indian smartphone brands can increase their global competitiveness.
• Public-Private Partnerships (PPPs): Encouraging joint ventures between global firms and Indian companies will strengthen supply chain security.

By enhancing domestic manufacturing capabilities, diversifying import sources, and forging international partnerships, India can reduce its economic dependence on China. Initiatives like the “Self-Reliant India” campaign aim to bolster local industries. Collaborations with nations such as the United States and South Korea in technology and defense sectors further support India’s pursuit of strategic autonomy.

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