An inter-ministerial panel has cleared five-six investment proposals in the electronics manufacturing sector, which include some pure-play Chinese companies and others with connections to the neighbouring country, people familiar with the matter said.The development is significant as these are among the first such approvals in recent times given border tensions and the scrutiny that investments from China have been attracting in India.Prominent names that have recently got approval include Chinese electronics major Luxshare, which is also a vendor for Apple, and a joint venture (JV) between Bhagwati Products (Micromax) and Huaqin Technology, in which the Chinese company will own a minority stake. Other proposals cleared include some Taiwan-based firms listed in Hong Kong or having investments from there.“Some are Taiwanese companies which have one beneficial owner who has some interest in Hong Kong or is listed on the Hong Kong exchange while a few are genuine Chinese firms,” said an official on condition of anonymity.Pressure from IndustryThese clearances come amid increasing pressure from the electronics manufacturing industry to approve investments with Chinese links to help broaden and deepen supply chains in India.Two rounds of meetings of the inter-ministerial panel have taken place so far and seven-eight proposals across all sectors have been cleared. A majority of these are in the electronics sector.Queries and messages sent to Luxshare and Bhagwati remained unanswered at the time of going to press.Indian companies have been pushing for a review of China trade ties, particularly Press Note 3. The Department for Promotion of Industry and Internal Trade (DPIIT) had in 2020 amended the foreign direct investment (FDI) policy to make prior government approval mandatory for inflows from countries sharing a land border with India through Press Note 3. This came in the backdrop of the India-China border clashes of mid-2020.The government appears to now be slowly opening up for Chinese investment with proper safeguards in place, as it’s of the view that local value addition must increase for self-sufficiency in electronics manufacturing to become a reality.Last month, ET reported that the government told industry it planned an inter-ministerial panel to expedite the approval of investment proposals by Chinese firms to operate in India or tie up with Indian companies if they meet certain criteria. That plan has been implemented and two rounds of meetings have been held, as reported above.“The inter-ministerial panel is meeting every six-seven weeks to take stock of the situation and grant approvals after doing thorough checks,” an official said.The conditions included clarifying that the investment and technology were critical to develop the local manufacturing supply chain in areas such as high-tech components. Also, no Chinese nationals could occupy key executive roles in any JV or foreign company operating in India. Besides this, the Chinese company could only hold a minority stake in a partnership with Indian firms as well as in foreign companies operating in the country.The Indian electronics industry had told the government that escalating tensions with China and the resulting lack of clearances for supply chain companies and visas for nationals from that country are said to have cost local manufacturers $15 billion in production losses as well as 100,000 jobs in the past four years, ET reported on June 16.In submissions to various ministries, the electronics manufacturing industry had also said that India had lost out on export opportunities worth $10 billion as well as $2 billion in value addition.In the past, the government had rejected proposals from various Chinese electronics companies that wanted to enter India. For instance, Vivo wanted to bring its component suppliers to the country but the proposals were rejected. Similarly, Apple’s contract maker for iPads, BYD, had failed to secure approval and chose Vietnam instead.“Earlier, even companies based in Taiwan were not getting approvals, in case the Chinese angle emerged, but now that is changing,” said the official cited above.For instance, Shanghai-headquartered Huaqin had earlier tried to enter India through a JV with local electronics maker Lava. But the project was shelved in the absence of approvals. Now the Chinese firm has taken a minority stake in its JV with Bhagwati, said officials. The Bhagwati-Huaqin JV has already taken control of Vivo’s old manufacturing unit in Noida and is expected to commence production in the coming few months.Officials added that Luxshare plans to set up its manufacturing unit in Tamil Nadu, but it is not going to make iPhones or any other Apple product to start with.“Apple is expected to work with its current vendors, including Foxconn, Wistron and Pegatron for the time being,” said another official.In May 2020, Luxshare had inked a deal with the Tamil Nadu government to take over the shuttered Motorola phone manufacturing unit and invest around Rs 750 crore. In fact, in 2022, the Tamil Nadu government had pushed the central government to expedite approval for the proposal.In China, Luxshare is the second largest maker of iPhones after Foxconn. Last year, Luxshare also bought a majority stake in a Pegatron factory in China. In India, both Wistron and Pegatron had announced plans to sell their manufacturing units to the Tata Group. While the deal for Wistron is completed and the facility is now owned by Tata, the Pegatron deal is under process, said officials.The need for Chinese executives and investments for setting up production units in India is set to rise further as the government moves towards clearing a production-linked incentive (PLI) scheme for electronics component manufacturing.The electronics manufacturing industry has sought a Rs 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 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,” an industry executive had told ET earlier. “If we have to localise those, then definitely help from Chinese in training and skilling, equipment supply, and more is needed.”
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