Chinese investments will help Indian electronics makers rise up the components manufacturing value chain. However, if geopolitical tensions escalate, they could jeopardise these joint ventures
A production line at the Dixon Technologies electronics manufacturing facility in Noida, India
Image : Madhu Kapparath
India-China relations have been sour for the past couple of years. Recent news reports, however, suggest that the government has been making a move on approving Chinese company investments into India. This has prompted companies, especially in the electronics manufacturing sector (EMS), to pursue joint ventures (JVs) with Chinese partners.
For instance, India’s largest electronics manufacturing services company, Dixon Technologies, recently filed for Press Note 3 clearance for its proposed JV with Chinese company HKC Corporation, confirmed people with knowledge of the matter. This will be to primarily manufacture liquid crystal modules and thin film transistor liquid crystal display modules. Going forward, Dixon is also looking at similar partnerships for components such as camera module and bare PCBs (printed circuit board), among others.
Press Note 3, issued in April 2020, mandates that Foreign Direct Investment (FDI) from entities or individuals based in countries sharing land borders with India require prior government approval. But Chinese counterparts cannot be majority stakeholders in the JVs. “This move aims to prevent opportunistic takeovers of Indian companies that lead to economic vulnerabilities,” explains Kathir Thandavarayan, partner, consulting, Deloitte India. “By encouraging partnerships and JVs with neighbouring countries, India can leverage their technical expertise while maintaining control over critical sectors.”
Recent news reports suggest that India is looking to offer short-term visas to Chinese technicians, for no more than six months, to help with the implementation of projects related to the PLI scheme. Given the existing skill gap in the industry, the knowledge and expertise of Chinese workforce will further help boost domestic manufacturing.
The Dixon-HKC Corporation partnership might be the first of many to help Indian EMS companies to climb up the components manufacturing value chain faster.