Indian electronics manufacturers are currently facing significant delays in obtaining government approvals for joint ventures (JVs) with Chinese firms, a situation intensified by recent geopolitical tensions stemming from China’s support for Pakistan during the latest conflict.

These delays are particularly critical as they threaten the ability of Indian companies to meet the July 31 deadline for applications under the government’s production-linked incentive (PLI) scheme for electronics components manufacturing.

The Indian government has unofficially imposed a cap on Chinese equity stakes in electronics JVs at 10%, primarily to facilitate technology transfer without granting operational control to Chinese partners. 

This policy has made Chinese firms cautious about entering or continuing JVs, as it restricts their influence and limits their financial incentive to share proprietary technology. Many Indian companies and their Chinese collaborators are now reconsidering their arrangements, with some seeking alternative partners from other countries. However, this is complicated by the fact that most critical suppliers for components such as display and camera modules, especially for budget smartphones, remain Chinese.

The impact of these restrictions is evident in high-profile cases as well. Apple’s plan to bring in Chinese camera module supplier Sunny Opticals to support its expanding manufacturing operations in India has reportedly stalled due to the government’s hesitancy in granting approvals for such partnerships. Industry executives note that while Chinese companies had previously shown greater willingness to invest in India to maintain market access—especially in the face of US-imposed tariff barriers—the new cap and scrutiny have forced a strategic rethink.

Press Note 3, introduced in 2020, already requires all investments from neighbouring countries, including China, to undergo government approval. The current situation has led to even stricter scrutiny, with at least six to seven major China-backed investment proposals facing delays under tighter review. 

Some exceptions may be considered, particularly if American or European companies are relocating operations from China to India, but these will be evaluated on a case-by-case basis, and even then, Chinese stakes may be allowed up to 49% only under special circumstances.

Industry leaders such as Dixon Technologies are attempting to navigate these restrictions by keeping Chinese stakes below the new thresholds and focusing on backward integration to boost margins. 

However, experts caution that the nature of electronics manufacturing—where rapid product refresh cycles require close operational involvement—makes low-stake, hands-off partnerships less practical for effective technology transfer and competitiveness.

India’s heightened scrutiny and unofficial equity caps on Chinese participation in electronics JVs, driven by geopolitical concerns, are causing widespread delays and uncertainty in the sector. This not only jeopardises the timelines for the PLI scheme but also compels both Indian and Chinese companies to reconsider their collaboration strategies, with potential ripple effects on the broader electronics supply chain and India’s ambitions to become a major electronics manufacturing hub.

Based On ET News Report