Despite forming a coalition government after the 2024 general election, Prime Minister Narendra Modi remains confident in his decade-long vision of transforming India into a global manufacturing powerhouse. This ambition is reflected in the ‘Make in India’ project launched in 2014, followed by the Production Linked Incentives (PLI) scheme aimed at attracting both domestic and foreign investment. The Bharatiya Janata Party’s (BJP) election manifesto dedicated three pages to manufacturing aspirations across various sectors, and the 2024-25 Union Budget provided significant support for the PLI scheme in electronics manufacturing, allocating ₹6,125 crore, an increase from ₹4,499.04 crore in the previous year. The government’s focus on domestic expertise is evident in the ₹1,148 crore allocated to electronics and IT research and development, a rise from ₹600 crore in 2023-24.
However, an interesting paradox emerges when examining the beneficiaries of the ‘Make in India’ project in the electronics industry. Chinese smartphone companies, which have established a strong presence in India over the past decade, are among the biggest beneficiaries. These companies have dominated the market, with four out of the top five best-selling smartphone brands at the end of 2023 being Chinese, collectively holding a market share exceeding 50%. This dominance is fueled by a combination of factors: India’s large smartphone user base, the widespread use of Android operating systems, and the ability of Chinese brands to offer a diverse range of applications catering to Indian preferences. Chinese companies have strategically expanded their production in India with support from both the central and state governments. They have employed sophisticated sales strategies, aggressive marketing campaigns, and targeted customer segmentation, coupled with brand-building initiatives, celebrity endorsements, and smart advertising, to effectively penetrate the Indian market, reaching beyond metropolitan areas.
Despite India-China bilateral tensions, including the Galwan Valley incident in 2020, Chinese companies have remained resilient in India. The subsequent calls for a boycott of Chinese products intersected with the Indian government’s ‘vocal for local’ narrative. However, the government is not simply seeking to restrict Chinese presence but to ‘Indianise’ their operations. This includes encouraging Indian equity partners, appointing Indian executives to leadership roles, collaborating with Indian contract manufacturers for production and assembly, promoting exports from India, and exclusively employing local distributors. This strategy mirrors China’s own approach of fostering domestic suppliers, which eventually expanded into Southeast Asia.
Tata Electronics’ entry into the smartphone manufacturing sector through the acquisition of Wistron’s India operations and negotiations to acquire Pegatron, another Taiwanese supplier for companies like Apple, is a notable example of this ‘Indianisation’ trend. Chinese smartphone companies, demonstrating adaptability, have responded to these government directives by gradually incorporating Indian distributors, streamlining their structure with separate sales and marketing operations for each brand, partnering with domestic manufacturers to leverage the PLI scheme, and actively seeking equity partners. This strategy reflects their willingness to evolve and endure periods of turbulence while maintaining consumer trust.
The vast potential of the Indian market encourages this long-term approach, but the path to complete manufacturing independence faces significant challenges. While the government actively seeks to dilute Chinese involvement by attracting Taiwanese investments, the development of a robust domestic supplier network requires substantial investment in ancillary industries, technology clusters, uninterrupted power and water supply, and improved working conditions. India currently lacks these resources on a scale necessary for complete self-reliance. Moreover, Chinese companies remain hesitant to share technology without clear guarantees on their equity participation.
The Indian government’s recent move to ease visa norms for Chinese technicians, within days of assuming office, highlights the complex dynamics at play. The Economic Survey, released ahead of the Budget, advocates for promoting foreign direct investment from China rather than solely relying on the ‘China Plus One’ diversification strategy of multinational companies. This underscores the delicate balancing act required by New Delhi in achieving its manufacturing goals – promoting homegrown players while allowing continued Chinese investments and operations. Only through this carefully calibrated approach can India truly realize its ambition of becoming a global manufacturing hub.
