New Delhi: India may limit Chinese companies to 10% equity investment in electronics joint ventures and only on condition of technology transfer since local know-how isn't available, officials familiar with the matter told ET. This comes as Chinese companies are showing greater willingness to accede to conditions for investing in India, allowing them to expand in the key market given that the tariff war with the US may make their products too pricey there.
The officials cited above said electronics contract manufacturing partners or supply chain companies from the neighbouring country will be preferred, rather than Chinese brands, in terms of equity ownership, as the Centre wants the local manufacturing ecosystem to develop.
They added that the government is open to tweaking the rules on Chinese equity if US or European firms want to relocate units from China to India.
Chinese suppliers of these firms can have up to 49% stake but that would be an exception, they said. Applications will be screened on a case-by case-basis, according to them.
"As the Indian firms need technology transfer, the government is likely to allow 10% Chinese equity in joint ventures. But there won't be open gates for Chinese investments in electronics or other sectors," said a person privy to the discussions.
The government is wary about the changed Chinese approach as it's still said to be blocking supply chains in three critical areas-drilling machines, solar panel equipment and electronics. Ties between India and China worsened after border violence erupted in 2020, turning New Delhi unfriendly to investments from that country.
"The drilling machines are made by German companies but since they have supply chains in China, the same are being throttled," said an industry executive.
"Similar is the case with electronics supply chain equipment-Indian companies are finding it difficult."
India doesn't want broad-based Chinese investment as it doesn't want to become another Vietnam, where most of the electronics ecosystem has been developed by the Chinese.
India hasn't yet been approached by US manufacturers who want to shift Chinese suppliers.
"Most of the companies must be deliberating their manufacturing plans based on the latest geopolitical situation," said an official. "Decisions will be made on what is best for India amid the new global order."
Apart from helping US companies to relocate, the government is also keen to support Indian companies to aggressively pursue the US market.
These moves come as India and the US expect to sign a bilateral trade agreement later this year.
The Indian government is understood to have been ready to accommodate Chinese suppliers in Apple's ecosystem. But the Cupertino-based company has instead decided to build a base of Indian companies, with help from Taiwanese and Japanese suppliers.
"Tata Electronics started making enclosures for iPhones on its own," said the official cited above. "While it took time, the move is bearing results now. Enclosures of all Apple devices, barring iPads, are now made locally and exported."
Over the past few years, Apple has been expanding the Indian vendor ecosystem with a view to increase value addition locally, as the company shifts more of its manufacturing base outside China. Apple's suppliers include Motherson Group, Jabil, Aequs, Tata Electronics, Sunwoda, Foxlink, Salcomp and Bharat Forge.
The officials cited above said electronics contract manufacturing partners or supply chain companies from the neighbouring country will be preferred, rather than Chinese brands, in terms of equity ownership, as the Centre wants the local manufacturing ecosystem to develop.
They added that the government is open to tweaking the rules on Chinese equity if US or European firms want to relocate units from China to India.
Chinese suppliers of these firms can have up to 49% stake but that would be an exception, they said. Applications will be screened on a case-by case-basis, according to them.
"As the Indian firms need technology transfer, the government is likely to allow 10% Chinese equity in joint ventures. But there won't be open gates for Chinese investments in electronics or other sectors," said a person privy to the discussions.
The government is wary about the changed Chinese approach as it's still said to be blocking supply chains in three critical areas-drilling machines, solar panel equipment and electronics. Ties between India and China worsened after border violence erupted in 2020, turning New Delhi unfriendly to investments from that country.
"The drilling machines are made by German companies but since they have supply chains in China, the same are being throttled," said an industry executive.
"Similar is the case with electronics supply chain equipment-Indian companies are finding it difficult."
India doesn't want broad-based Chinese investment as it doesn't want to become another Vietnam, where most of the electronics ecosystem has been developed by the Chinese.
India hasn't yet been approached by US manufacturers who want to shift Chinese suppliers.
"Most of the companies must be deliberating their manufacturing plans based on the latest geopolitical situation," said an official. "Decisions will be made on what is best for India amid the new global order."
Apart from helping US companies to relocate, the government is also keen to support Indian companies to aggressively pursue the US market.
These moves come as India and the US expect to sign a bilateral trade agreement later this year.
The Indian government is understood to have been ready to accommodate Chinese suppliers in Apple's ecosystem. But the Cupertino-based company has instead decided to build a base of Indian companies, with help from Taiwanese and Japanese suppliers.
"Tata Electronics started making enclosures for iPhones on its own," said the official cited above. "While it took time, the move is bearing results now. Enclosures of all Apple devices, barring iPads, are now made locally and exported."
Over the past few years, Apple has been expanding the Indian vendor ecosystem with a view to increase value addition locally, as the company shifts more of its manufacturing base outside China. Apple's suppliers include Motherson Group, Jabil, Aequs, Tata Electronics, Sunwoda, Foxlink, Salcomp and Bharat Forge.
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