Government’s Manufacturing Ambitions
Despite being in a coalition after the 2024 general elections, Prime Minister Narendra Modi remains confident about transforming India into a global manufacturing hub.
The ‘Make in India’ initiative, launched in 2014, and the Production Linked Incentives (PLI) scheme are central to this agenda, aiming to attract both domestic and foreign investments.
The 2024-25 Union Budget allocates ₹6,125 crore for the PLI scheme in large-scale electronics manufacturing, up from ₹4,499.04 crore in the 2023-24 Budget.
₹1,148 crore has been allocated for research and development in the electronics and IT sectors, an increase from ₹600 crore in the previous Budget.
Impact of Chinese Smartphone Companies in ‘Make in India’
Chinese smartphone companies have been major beneficiaries of the ‘Make in India’ initiative, with operations spanning a decade.
As of 2023, four of the top five best-selling smartphone brands in India were Chinese, with a combined market share of over 50%.
The dominance of these brands has been aided by the large base of Android users in India (about 70% market share).
Chinese companies have capitalized on:
Central and State government support.
Well-planned marketing strategies, customer segmentation, brand-building, celebrity endorsements, and sponsorships of popular cultural entities.
These companies have penetrated beyond urban areas, becoming easily accessible to Indian consumers.
India-China Relations and the Shift Post-Galwan Incident
Despite ups and downs in India-China relations, Chinese smartphone companies continued operating successfully until the Galwan Valley incident in 2020.
Following the incident, the Indian government’s call to boycott Chinese products aligned with its ‘vocal for local’ narrative.
In addition to heightened scrutiny of Chinese investments (especially regarding tax compliance), the Indian government has sought to ‘Indianize’ their operations through:
Indian equity partners in local operations.
Appointment of Indian executives in leadership roles.
Involvement of Indian contract manufacturers for production and assembly.
Expanding exports from India and hiring local distributors.
The long-term strategy is to build a network of indigenous manufacturers of precision devices, similar to China’s own development of home-grown suppliers.
Steps Towards Indianisation in the Smartphone Industry
Tata Electronics has entered the smartphone manufacturing sector as a contract manufacturer, notably taking over Wistron’s India operations and moving towards acquiring Pegatron, both Taiwanese suppliers to Apple.
Challenges in Achieving Full Indianisation
The Indian government aims to reduce Chinese involvement and attract Taiwanese investments, but there are major obstacles
Manufacturing all smartphone components domestically requires ancillary industries, technological clusters, and continuous utilities (power, water).
India currently lacks these necessary resources at scale.
Chinese companies are hesitant to share their technology without clarity on equity participation.
The Ministry of Electronics and Information Technology and the Ministry of Commerce and Industry have pushed to ease visa norms for Chinese technicians, highlighting the government’s difficulty in balancing the needs of Indian and Chinese companies.
The Government’s Economic Survey advocated for promoting Foreign Direct Investment (FDI) from China rather than fixating on the China Plus One Diversification strategy of multinational companies.
To achieve its manufacturing goals, the Indian government will need to maintain a delicate balance between nurturing home-grown players and allowing continued Chinese investments in the Indian market.
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