Government to Back Chinese Investments in Electronics Through Joint Ventures

India plans to support Chinese investments in electronics manufacturing through joint ventures with Indian firms that ensure technology transfer. The Ministry of Electronics and IT (MeitY) views this as vital to boosting local production and meeting value addition targets. Despite tightened FDI norms under Press Note 3, MeitY backs collaborations that align with India’s push for a robust electronics ecosystem. While trade tensions with China pose challenges, partnerships with Chinese firms remain critical for addressing component shortages and expanding India’s global competitiveness in electronics manufacturing.

To help India's electronics manufacturing sector, government officials have said they are open to Chinese investments as long as they are made through joint ventures with Indian companies and involve the transfer of technology. Sources say that the Ministry of Electronics and Information Technology (MeitY) wants these kinds of partnerships to improve the country's ability to make things, not only put up assembly lines.

Key to the Change in Manufacturing

Officials say that allowing some Chinese investments is important for growing manufacturing in India and making sure that the planned component incentive scheme works. MeitY is said to be pushing for less strict rules on investments from China, which is in line with what industry leaders and Niti Aayog, the government's think tank, have said. The latter has suggested that Chinese companies be able to buy up to 24% of Indian companies without any extra checks.

A Non-Negotiable: Technology Transfer

The government will only help if Chinese investments come with a clear plan on how to transfer technology. Officials made it clear that projects that only want to build assembly lines would not be considered. Instead, businesses in the country need to get access to important technologies and processes so they may grow their operations effectively.

An official said, "Local manufacturers need Chinese expertise because many important parts come from there." This plan is also thought to be important for boosting the value added to electronics in the area, which is a major goal of the government.

Over the past six to seven years, the value added to electronics in the area has gone up by more than 20%, mostly because of the Production Linked Incentive (PLI) plan. The government wants to raise this number to 30% in the next two to three years and to 38% in the next five years, which is the same as China's standard.

Press Note 3 and What the Industry Needs

Press Note 3 made it harder for foreign direct investment (FDI) to happen in 2020, after India and China had border skirmishes. Investments from nations that share a land border with India must get government approval first under this regulation.

Even with these rules, MeitY has supported collaborative ventures that encourage sharing of technology. An executive in the business said that a lot of the approvals under Press Note 3 were for ideas connected to making electronics, since the industry depends on Chinese parts and know-how.

"The main goal is to build a strong electronics ecosystem in India." A senior executive in the electronics industry remarked, "If a joint venture proposal fits with this goal, the government is likely to support it."  

Dealing with Trade Tensions

India has had trouble expanding its electronics manufacturing base, especially because trade tensions with China are rising. India's smartphone manufacturing output has skyrocketed since 2020. In FY25, exports reached $24 billion, while total domestic production in FY19 was only $26 billion. China has responded to this accomplishment by putting up informal trade obstacles and limiting the export of rare earth materials that are important for making electronics.

Indian businesses have had a hard time because of these restrictions. They have to pay more to make things, and they are in danger of not reaching their $32 billion smartphone export goal for this fiscal year. Representatives from the industry have asked the government to quickly fix these trade problems.

 The Way Forward

The government has started a ₹22,919-crore electronics component manufacturing project to deal with shortages of parts and make the supply chain more resilient. This program is meant to encourage local production, but working with Chinese companies is still important because they control the worldwide supply chain for components.

Several Indian firms, such as Dixon Technologies and Micromax's Bhagwati, have already signed agreements to work together with Chinese corporations, but they still need official approval. These alliances should help India get the skills it needs while also encouraging technical independence.

India wants to make its electronics ecosystem stronger, and it will be important to find the right balance between building up its own skills and dealing with geopolitical issues. Support for joint ventures that focus on transferring technology could help the industry become more self-sufficient and competitive on a global scale.