By Unni K Chennamkulath/New Indian Express

Chennai, July 28 – Indian-majority joint ventures with conditional Chinese investment are emerging as a new model for electronics manufacturing — combining global expertise with local control. This evolving structure, as seen in the Dixon–Longcheer and Epack–Hisense partnerships, illustrates the potential for scaling India’s electronics footprint under the Production Linked Incentive (PLI) and component manufacturing schemes.

With this, the country’s electronics sector is undergoing a shift from simple assembly to deeper component and design integration. Driven by PLI incentives and facilitated by new JV models, these structured partnerships — with Indian majority ownership, strategic Chinese participation, and compliance with FDI norms — are considered a practical middle path.

A key advantage of this model lies in its balance. As long as the rules remain clear, partnerships equitable, and technology localised within India’s value chain, such collaborations can support both domestic manufacturing and export-oriented production under the “Make in India” initiative.

Dixon and Epack Models

Dixtel Infocomm, a joint venture between Dixon Technologies (74%) and China-based Longcheer (26%), received government approval from MeitY on July 25. The venture will manufacture smartphones, tablets, smartwatches, AI PCs, automotive, and healthcare electronics. The equity split and focus on technology transfer and localization of non-semiconductor subcomponents align with India’s regulatory framework, marking a potential shift in policy.

In parallel, Dixon is forging multiple component-level partnerships with Chinese firms — including Chongqing Yuhai Precision (precision mechanicals), Kunshan Q Tech (camera/fingerprint modules), HKC (display modules), and is in talks with Vivo for handset manufacturing. These moves support deeper backward integration under the electronics component scheme.

Separately, Chinese appliance major Hisense has contracted Epack Durable Ltd to manufacture air-conditioners, refrigerators, washing machines, and small appliances at a new facility in Sri City, Andhra Pradesh. Production is set to begin by June 2025, targeting 1 million room AC units by FY28, with a strong export orientation.

Hisense plans to acquire up to a 26% stake in the Epack subsidiary operating the plant, bringing in design, tooling, and technical know-how. The collaboration is expected to generate up to US$1 billion in revenue over five years, with investments of ₹800–1,000 crore. Epack, India’s second-largest AC contract manufacturer, also serves brands such as Daikin, Panasonic, Haier, and Blue Star, with facilities across Andhra Pradesh, Rajasthan, and Uttar Pradesh.

Emerging Trends

Under the government’s ₹25,000 crore Electronics Component Manufacturing Scheme, Indian electronics manufacturing services (EMS) firms such as Micromax, Zetwerk, and Syrma SGS are pursuing similar partnerships with Chinese suppliers — covering areas like display modules, PCBs, and camera subassemblies.

Micromax already has a JV with Taiwan’s Phison (MiPhi) for NAND storage and is exploring partnerships with China’s Huaqin via its group company, Bhagwati Electronics.

Optiemus has secured audio/IoT sourcing from OnePlus, becoming the third Indian manufacturer (after Xiaomi and Realme) to collaborate with Chinese brands for local production.

The incentive scheme aims to reduce India’s heavy dependence on imports — with Chinese firms currently accounting for 70–75% of component supplies. By partnering with original design manufacturers (ODMs) and component makers from China, Indian firms are seeking to localize critical sub-component manufacturing — such as display modules, camera units, and battery enclosures — and integrate with global supply chains.

These JVs are expected to drive technology upgrades, higher value addition, and help meet PLI thresholds — assuming timely regulatory clearances.

Regulatory Outlook

India’s current foreign direct investment (FDI) rules mandate prior government approval for investment from neighboring countries, including China. In most cases, Chinese ownership is capped at 26%, although select proposals may be allowed up to 49% under stricter conditions.

Recent developments suggest a conditional relaxation of curbs for Chinese investment in the electronics sector — particularly where the JV involves technology transfer, Indian majority ownership, and localization of upstream capabilities.

However, geopolitical sensitivities — especially those involving China-Pakistan ties — continue to cause delays in approvals. Several proposals remain pending, despite alignment with industrial policy, due to national security considerations.

India’s evolving stance now allows for structured, minority Chinese stakeholding with clear mandates on localization and tech transfer. Approvals are possible but gated — requiring joint ventures to demonstrate Indian control, compliance with security guidelines, and contribution to domestic value chains.

Challenges and Considerations

The success of this model depends on Chinese companies’ willingness to operate under minority stake structures while providing meaningful technology transfer. In some cases, Chinese firms may prefer non-equity partnerships or technical collaborations to navigate regulatory restrictions while still accessing the Indian market.

For Indian firms, government policy clarity and faster approvals are critical to scaling up local component manufacturing and fully leveraging the PLI and component incentive schemes.

For Chinese companies, aligning with Indian rules — including local R&D, controlled equity participation, and long-term technology commitments — will be essential for partnership viability.

Policymakers now face the task of balancing national security with industrial growth, enabling India to build an indigenous electronics manufacturing ecosystem while selectively leveraging global expertise.

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