Context

• 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.
• These developments not only threaten India’s aspirations of becoming a global manufacturing powerhouse but also reveal China’s strategic efforts to maintain its dominance in the electronics supply chain.
• Amid these developments, it is crucial to analyse the underlying factors, economic consequences, and the long-term strategies India needs to adopt in response to these challenges.

China’s Geopolitical Strategy and Supply Chain Domination

• China’s recent actions appear to be part of a broader strategy to exert economic pressure on India by leveraging its dominant position in high-tech manufacturing.
• The restrictions on Chinese engineers aim to prevent the tacit transfer of knowledge to their Indian counterparts, thereby slowing the development of India’s manufacturing expertise.
• Additionally, by limiting exports of specialized equipment, over which China holds a near-monopoly, Beijing seeks to delay production timelines and maintain its leverage in global supply chains.
• These measures come at a time when global corporations, including Apple, are diversifying their manufacturing bases beyond China due to rising trade tensions with the United States and the disruptions caused by the COVID-19 pandemic.
• The ‘China Plus One’ strategy has prompted many companies to explore alternative manufacturing destinations such as India, Vietnam, and Mexico.
• Recognising India’s potential as a rising manufacturing hub, China’s restrictions serve as a strategic reminder to global firms of its indispensable role in the electronics industry.

India’s Response to China’s Restrictions and Remaining Challenges

• India’s Strategic Investments through the PLI Scheme
  • India’s commitment to strengthening its electronics manufacturing industry is evident in the continued focus on the Production-Linked Incentive (PLI) scheme.
  • Launched in 2020, the PLI scheme provides financial incentives to companies for manufacturing mobile phones and electronic components in India.
  • The scheme aims to not only attract global players like Apple but also to stimulate the development of a domestic supply chain that can reduce India’s dependency on foreign components.
  • The Indian government has significantly increased its allocation for the PLI scheme over the years.
  • In 2025, the allocation rose to ₹8,885 crore ($1.02 billion), up from ₹6,125 crore ($0.70 billion) in 2024.
  • For companies like Foxconn, this translates into tangible benefits, incentivizing them to expand production in India and create jobs in the process.
• Dependence on China for Components and Machinery
  • Despite the growing investments in India’s electronics manufacturing sector, the country still faces a critical challenge: its heavy reliance on China for essential components and machinery.
  • China remains the world’s largest producer of high-tech manufacturing equipment, including machinery for assembly lines, components like printed circuit boards, camera modules, sensors, and connectors, and critical materials for mobile phones.
  • This dependence on Chinese imports has become a significant bottleneck, particularly when China decides to restrict the flow of these components.
  • The recent curbs imposed by China on the export of specialised manufacturing equipment to India have highlighted this vulnerability.
  • Without access to these key components and machines, India’s manufacturing sector could face substantial delays in production, jeopardizing its ability to scale up and meet both domestic and global demand.
  • Moreover, Foxconn and other contract manufacturers rely heavily on the smooth flow of these Chinese components to maintain their operations in India.
  • As one of the largest assemblers of Apple’s products, Foxconn’s ability to ramp up production is directly tied to the availability of these imported parts.
  • Any disruption to the supply of Chinese-made components, whether due to restrictions or delays, could severely impact production timelines and cost structures.

The Role of Foxconn and Apple in India’s Manufacturing Ambitions

• Foxconn, a key contract manufacturer for Apple, has been instrumental in helping India meet its manufacturing goals.
• Apple’s decision to expand its production in India, including the assembly of flagship products like the iPhone 15, reflects a growing recognition of India as an important player in global electronics manufacturing.
• Over the years, the Indian government has worked diligently to build an attractive environment for foreign direct investment (FDI), particularly from companies like Foxconn, which have the scale and expertise to drive large-scale manufacturing operations.
• India’s southern states, such as Tamil Nadu and Karnataka, have emerged as critical hubs for this manufacturing push, hosting Foxconn’s largest production facilities.
• In 2023, Apple’s decision to assemble the iPhone 15 at Foxconn’s facility in Tamil Nadu, as well as Tata Electronics’ facility in Karnataka, marked a significant milestone for the country.
• By the fiscal year ending in March 2024, India had assembled approximately $14 billion worth of iPhones through Foxconn and its partners, including Pegatron and Tata Electronics.

The Way Ahead for India to Build a Self-Sufficient Manufacturing System

• The Need for Diversification and Localized Production
  • The current strategy relies heavily on assembling finished products, but for India to become a true manufacturing powerhouse, it must focus on developing its own domestic supply chains.
  • This includes encouraging the growth of local component manufacturers and reducing the reliance on Chinese imports.
  • One approach would be to invest in the domestic production of critical components such as semiconductors, printed circuit boards, and mobile phone batteries.
  • This would not only help shield India from disruptions in the global supply chain but also create high-value jobs in India’s manufacturing sector.
• Strategic Collaboration with Apple and Foxconn
  • India’s response to China’s restrictions could also involve deeper collaboration with Apple and Foxconn, both of which have significant stakes in India’s manufacturing success.
  • Foxconn, for example, has already invested billions in India, and its continued presence in the country is vital to India’s long-term ambitions.
  • India must leverage its partnership with these companies to negotiate with China for more favourable trade terms, including the easing of restrictions on the export of essential machinery and components.
  • Apple’s role is also crucial, as the company’s continued commitment to India is seen as a barometer for the country’s broader manufacturing ambitions.
  • India, therefore, must ensure that its relationship with Apple and Foxconn remains strong, facilitating the growth of both companies’ operations while simultaneously building its own indigenous manufacturing capacity.

Conclusion

• While India’s efforts to develop a competitive electronics manufacturing sector are commendable, its dependence on China for key components and machinery remains a significant obstacle.
• The restrictions imposed by China on Foxconn’s operations in India serve as a reminder of the vulnerabilities inherent in global supply chains.
• For India to reduce its dependency on China and build a more self-sufficient manufacturing ecosystem, it must prioritise local component production, deepen collaboration with foreign companies like Apple and Foxconn.