Escalating tensions with China are said to have cost Indian electronics manufacturers $15 billion ( ₹1.25 lakh crore) in production losses as well as 100,000 jobs in the past four years, the Economic Times reported.
This comes amid protracted delays in issuing visas to Chinese citizens and government probes into Chinese companies operating in India.
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In submissions to various ministries, the electronics manufacturing industry said India has also lost out on a $10 billion ( ₹83,550 crore) export opportunity besides $2 billion in value addition loss, according to the report.
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According to industry executives, 4,000-5,000 visa applications of Chinese executives are currently awaiting government go-ahead, hindering the Indian electronics manufacturing industry’s expansion plans.
This is despite India setting up a mechanism to clear business visa applications within 10 days.
The India Cellular and Electronics Association (ICEA) and Manufacturers Association of Information Technology (MAIT) lobby groups are urging the Centre to hasten visa approvals for Chinese executives that are currently taking more than a month.
These executives are needed for technology and skills transfer, installing and commissioning production units, setting up efficiency processes, and conducting maintenance, executives said. Also stuck in the backlog are visa applications for leadership teams of Chinese firms invited to set up manufacturing units here in partnerships with local companies, the executives told the Economic Times.
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“Our Domestic Value Addition (DVA) plan has been impacted severely. When the PLI (Production Linked Incentive) scheme for mobiles was launched (in 2020-21), it was expected that the supply chain would shift from China. But due to this standoff and Press Note 3 (mandating greater scrutiny of investments from countries sharing land border with India), shifting of the supply chain has got severely curtailed,” ICEA said.
The association represents top mobile brands and manufacturers such as Apple, Oppo, Vivo, Dixon Technologies, and Lava, according to the report.
ICEA estimates that normal business activity between India and China would have resulted in value addition to Indian firms rising from the current 18% to 22-23%, leading to an additional ₹15,000 crore annual contribution in the domestic mobile phone ecosystem.
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“We are cautiously optimistic that a balanced resolution which will alleviate the concerns of the industry and balance national security interests,” Pankaj Mohindroo, chairman of ICEA, told the Economic Times. “The industry is not requesting to kowtow to any nation, but to recognise that the path to Atmanirbharta depends upon moving up a China-dominated value chain.”
He added that while India has offset several disadvantages and become more competitive, it is still suffering a new form of disadvantage against nations like Vietnam, Malaysia, and Mexico which have free access to capital, technology and skills from China.
Industry executives said even Chinese nationals are apprehensive of coming to India, fearing arrests and interrogations. “If there is a requirement of 50 engineers to come to India to help set up a factory, only 10 or so are willing to come,” an industry executive told the Economic Times, on condition of anonymity.
He added that since 2020, due to the worsened geopolitical situation and intense scrutiny of businesses run by Chinese enterprises, these companies have stopped further investments in India, hampering further development of the supply chain.
“If these companies decide to leave India, it will have a major impact on availability of products and services to the consumers, loss of employment and shutting of large manufacturing capacities,” the executive added.
For instance, a large Chinese manufacturer had committed to build a plant in India to make Apple iPads, but eventually shifted to Vietnam where it is currently producing $8-10 billion ( ₹66,840 – 83,550 crore) worth of iPads per year, according to the report.
Chinese smartphone brands are also wary of participating in India’s flagship mobile PLI scheme, resulting in loss of business opportunity, say executives.
“If Chinese companies would not have been deterred from participating in the mobile PLI, we (India) could have generated additional export revenue of at least $5-7 billion ( ₹41,775-58,485 crore) since 2020,” another executive said.
The need for Chinese executives for setting up production units in India is set to rise further if the government approves a PLI scheme for electronics component manufacturing, the report read.
The electronics manufacturing industry has sought a ₹30,000-35,000 crore PLI package for making components and sub-assemblies, along with capital expenditure backup, to support an expected $75-80 billion ( ₹6.26-6.68 lakh crore) demand for electronics components by 2026 for reducing heavy reliance on imports and improving the country’s trade deficit with China.
“For some components, the semiconductor industry in Korea and Taiwan can be helpful in technology transfer for the semiconductor parts, but for components like display, battery cell, there is a lot of contribution from China which has cutting-edge technology. If we have to localise those, then definitely help from Chinese in training and skilling, equipment supply, and more,” said the industry executive.
India’s import of electronics, telecom, and electrical products soared to $89.8 billion in the financial year 2023-24, of which 44% was sourced from China and 56% when combined with Hong Kong, according to a Global Trade Research Initiative (GTRI) report released in May.
This compares with imports of $7.9 billion ( ₹66,004 crore) between 2007 and 2010, which surged to $23.3 billion ( ₹1.94 lakh crore) during 2020 to 2022, according to the Economic Times.
