[Answered] With large-scale electronics manufacturing important to India, how should New Delhi respond to China’s weaponization of e-supply chains?

China’s recent restrictions on travel by engineers working in Foxconn’s Indian facilities and curbs on exports of specialized manufacturing equipment highlight the risks of overdependence on Beijing for key components in India’s electronics supply chain.

Challenges Posed by China’s Actions

• Workforce Disruptions: Preventing Chinese engineers and technicians from working in India hampers knowledge transfer and delays production.
• Restrictions on Specialised Equipment: China’s control over key machinery creates bottlenecks in India’s supply chain, crippling expansion efforts.
• Dependence on Chinese Components: India remains largely an assembly hub, relying on Chinese imports for semiconductors, PCBs, and lithium-ion battery components.
• Strategic Manipulation of Global Corporations: China’s actions aim to slow India’s rise as a global manufacturing hub while reinforcing its indispensability in the supply chain.

Policy Measures for Supply Chain Resilience

• Engaging Apple and Foxconn in Negotiations with China: Given their significant investments in both India and China, Apple and Foxconn can play a role in negotiating with Beijing to ease restrictions. Diplomatic channels should work alongside corporate stakeholders to ensure smoother supply chain operations.
• Scaling Up Component Manufacturing: The PLI scheme should expand incentives for semiconductor fabs, PCB manufacturing, and lithium-ion battery production.
• Developing Ancillary Industries: Encouraging small and medium enterprises (SMEs) to produce electronic components locally.
• Strengthening Alternative Supplier Networks: Increasing imports from Taiwan, Japan, South Korea, Vietnam, and Malaysia to reduce dependence on Chinese exports.
• Strategic Bilateral Agreements: Partnering with Taiwan’s TSMC and Japan’s Sony for semiconductor and display technology.
• Stockpiling Critical Inputs: Establishing reserves of essential materials like gallium, germanium, and rare earth elements.
• On-Site Training & Skill Development: Investing in industry-specific skill programs to reduce reliance on foreign engineers.
• Building R&D Clusters: The National Manufacturing Mission should focus on technology-sharing hubs for specialized manufacturing.
• Boosting Domestic OEMs: Attracting more private capital to strengthen India’s local contract manufacturing ecosystem.
• Reducing Customs Duties on Inputs: The removal of import duties on key components in the Union Budget 2025 is a positive step, but further rationalization is needed.

Conclusion

India must balance short-term negotiations with long-term strategic investments to counter China’s weaponization of e-supply chains. By diversifying suppliers, enhancing domestic production, and developing skilled manpower, New Delhi can ensure that its electronics manufacturing ambitions remain on track while reducing vulnerabilities to geopolitical disruptions.