Indian electronics companies face delays on Chinese JV approvals amid concerns over Beijing's support for Pakistan
Indian electronics manufacturing companies are having a hard time securing
government approval
for completing joint venture (JV) agreements with Chinese firms for
technology transfer
to make electronics components.
The delay has put their plans in jeopardy ahead of the July 31 deadline to apply for the incentive scheme for
electronics components manufacturing
, industry executives said.
This comes in the wake of Beijing backing Pakistan in the recent conflict.
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Chinese partners in existing JVs, which need government clearance, are wary of this impacting operations that began before
Operation Sindoor
, which followed the
Kashmir terrorist attack
. On Monday, a top executive at a leading Indian electronics contract manufacturer rushed to meet his Chinese partners.
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Component Suppliers and Tech with China
They were looking for reassurances that their mobile phone manufacturing joint venture wouldn't be affected, said people aware of the development.
They were particularly concerned about the government unofficially mandating a threshold stake of 10% for Chinese companies in joint ventures, primarily for technology transfer, with no participation in operations.
The restrictions have pushed back to the drawing board Indian companies and their Chinese partners that are planning to enter the component manufacturing scheme. Some are even looking for new partners from other countries. But the catch is that most display and camera module suppliers, particularly for budget smartphones, are Chinese.
Further, convincing Chinese companies to agree to technology transfer for just 10% equity stake may be difficult. 'Getting a Chinese partner to transfer proprietary technology may need financial incentives above and beyond equity stakes,' said an industry executive. 'There is significant worry among companies planning to enter the components space. Assembly plans are facing delays, possibly linked to the recent conflict.'
Another casualty of Beijing's support for Pakistan appears to be
Apple
. The plan of the iPhone maker, which has been rapidly expanding manufacturing in India, to secure the India entry of Chinese camera module supplier
Sunny Opticals
could be delayed, industry executives said.
'Apple was planning to get its component suppliers to India as part of the ongoing shift since last year,' an industry executive told ET. 'Talks were at advanced stages for a joint venture with an Indian enterprise, but the government is now hesitant in granting approvals.' Apple did not respond to queries.
Dragon troubles
Chinese companies had been showing greater willingness to invest in India to maintain access to its market, given the tariff barriers put up by US President Donald Trump.
However, New Delhi plans to restrict Chinese companies to 10% equity investment in joint ventures and that too, only on condition of technology transfer, ET reported on April 21.
Leading contract maker
Dixon Technologies
expects to be insulated from such curbs since the Chinese companies it's forming JVs with don't have stakes higher than 26%, said its executive chairman Sunil Vachani.
Dixon is planning to backward integrate its smartphone and IT hardware assembly operations with electronics components to shore up margins. 'We have only just applied for Press Note 3 approval for the joint venture with (China's) HKC. It is yet to go to any particular committee or ministry, so it is difficult to say whether it will get affected by recent events,' Vachani said.
Press Note 3 norms came into effect in 2020 amid a heightening of India-China tensions. This stipulates that investments from companies in neighbouring countries require government approval.
Vachani said a smaller stake by Chinese companies in joint ventures would be more acceptable, given the current situation.
But industry experts said that given the nature of the business, higher stakes and active involvement in operations are necessary since the products that are manufactured are continuously refreshed and introducing each iteration requires supervision.
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