Relations between China and India are teetering on the brink of a new storm. This time, it’s not happening along contentious borders, but deep within the economic ties that bind and strain the two countries.
The latest flashpoint? Significant delays in shipments of specialized manufacturing equipment from Chinese ports to India threaten to derail India’s ambitious efforts to strengthen its domestic manufacturing sector.
As the stakes rise, both Apple and Foxconn India have called for urgent intervention from the Indian government. So far, production has not been affected, but officials have warned that extended delays could jeopardize Apple’s ambitious manufacturing expansion plans in India.
But it’s not just Apple. Electronics companies across the board are in trouble. In a swift response, the Ministry of Electronics and Information Technology (MeitY) issued a warning to the Ministry of External Affairs (MEA), highlighting the far-reaching implications of these troubling bottlenecks.
Technology magazine Rest of the World recently reported that Taiwanese manufacturing giant Foxconn, which has traditionally focused on Apple production in China, is facing serious obstacles in moving operations to India. Ta.
Chinese employees will not be able to travel to Foxconn’s iPhone factory in India, and Chinese employees already stationed at the factory will reportedly be recalled.
“Currently, we are not allowed to bring equipment and personnel (into India),” one of the sources told Rest of World. “And India does not have the technology to manufacture that equipment.”
Apple and Foxconn have not yet publicly commented, but the nonprofit publication cites sources who claim the Chinese government is behind the suspension of worker dispatches and equipment exports.
Multi-pronged attack
This is not the only covert move by China to hinder India’s industrial development.
Key sectors that rely heavily on imports from China, such as solar panels and electric vehicles (EVs), are now facing serious difficulties in securing essential capital equipment, including high-tech machinery, as China has largely cut off supplies. are.
China is an important hub for tunnel boring machines (TBM). It has recently started blocking the sale of these critical machines to India, throwing critical infrastructure projects into disarray.
The situation escalated further when Commerce Minister Piyush Goyal told German Deputy Prime Minister Robert Habeck that India would have no choice but to stop purchasing German TBMs if China continued to block these important sales. It has expanded to the point where it warns that it may not be possible.
The entry of Chinese companies into the pharmaceutical sector, where India’s Production-Linked Incentive (PLI) scheme promotes the creation of alternative supply chains for active pharmaceutical ingredients (APIs), pharmaceutical intermediates (DIs), and key starting materials (KSMs). is accelerating. They are using predatory pricing strategies to hinder India’s progress.
Recently, prices of key active pharmaceutical ingredients such as paracetamol, penicillin, sitagliptin, metformin, and telmisartan have fallen significantly, raising concerns within the industry.
Industry insiders say these price cuts are a calculated effort by Chinese companies to destabilize India’s nascent pharmaceutical sector and threaten the country’s ability to stabilize prices and build a resilient domestic supply chain. is raising doubts.
Similarly, India’s clean energy ambitions are under siege, with China’s predatory pricing undermining the country’s efforts to strengthen domestic manufacturing under the PLI regime.
“Let’s be clear: imported solar modules and cells are being dumped from China, and this anti-competitive practice is distorting market prices. China’s Crystalline Silicon Solar Cell Supplies “Due to overall overcapacity in the chain, Chinese solar cell manufacturers are selling their products below their manufacturing cost,” said Sujoy Ghosh, vice president and managing director of First Solar’s India operations. said in an interview with The Indian Express.
The numbers tell a grim story. According to credit rating agency CRISIL, as of June 2024, solar modules imported from China cost an average of 9.1 cents per watt, compared to 18 cents per watt for domestically produced modules. This price difference highlights the challenges for Indian manufacturers to compete on a level playing field.
To make matters worse, China is stepping up its retaliation against India’s import restrictions. In response to India’s anti-dumping probe against Chinese companies, the Chinese government has begun to covertly block India’s access to critical solar power facilities, further disrupting the manufacturing environment for Indian industry.
pressing concerns
China’s dominance in numerous product categories creates the risk of economic coercion, where governments restrict access to critical inputs for political influence.
Nowhere is this more evident than in the export of rare earths and critical minerals, which are a high priority in countries’ green transition efforts.
A notable example of this tactic occurred more than a decade ago when China restricted rare earth exports to Japan amid a territorial dispute in the East China Sea. Most recently, the Chinese government imposed export restrictions on germanium and gallium, two minerals important in high-tech manufacturing.
China’s near-monopoly over the production and processing of rare earths and critical minerals is a further concern, especially for countries pursuing ambitious renewable energy goals.
For India, this dependency is a clear vulnerability, threatening the foundations of its wind, solar and EV industries.
“Restricting critical mineral exports to India through a combination of market share controls and tightened export controls for rare earth resources and their mining and processing is a distinct possibility in the foreseeable future and requires careful attention. “It is necessary to be monitored,” warns former foreign minister Vijay Keshav Gokhale.
Such measures could strategically slow down India’s efforts to indigenize its clean energy supply chain, he said.
Going too far
Amid problems of domestic industrial overcapacity and slowing economic growth, China’s covert application of industrial “sanctions”, particularly on EVs and high-tech products, reveals a subtle and calculated strategy.
At its heart is Beijing’s growing anxiety over India’s ambitions to emerge as the next global manufacturing hub. Those fears were further amplified by Apple’s successful move of iPhone production to India. This shift signals broader changes that threaten China’s dominance in global supply chains.
“China wants India to become an integral part of its supply chain, rather than a substitute for it. Various methods are being applied to pursue this strategic objective,” Gokhale said. is writing.
Kyle Chan, a postdoctoral fellow at Princeton University who specializes in industrial policy in China and India, agrees. In an interview with Rest of World, he pointed out that the Chinese government may be particularly wary of moving manufacturing to India.
“Maybe China, like many people, is surprised at how quickly Apple was actually able to move some of its iPhone production to India,” Zhang said, adding that China He speculated that the government could use these moves to remind U.S. companies. China)’s influence in the world market.
Apple’s move to diversify its supply chain is a showcase of manufacturing success that is likely to attract other tech giants, especially in key areas such as semiconductors. Therefore, China may be wary of India expanding its domestic manufacturing too quickly, especially in strategically important areas.
Beyond supply chain conflicts, China’s actions in industries such as pharmaceuticals and solar power equipment also stem from the impending overcapacity crisis. Facing an economic slowdown, Chinese manufacturers are under pressure to export surplus goods at lower prices.
Problems in the world’s second-largest economy will cause Chinese manufacturers to ship excess factory products overseas at lower prices, according to views expressed at the 6th China Forecast Conference of Mercator China Research Institute (MERIX). It is expected that there will be pressure to do so.
If that weren’t enough, China’s dominance also leads to monopolistic practices, severely limiting the scope for new entrants to emerge as a new manufacturing powerhouse.
A recent study by the Rhodium Group found that “the Chinese government is forcing companies to partner, merge and consolidate, gain market share, raise prices, restrict access to products for which they already have significant market power, or “We can encourage preferential treatment for domestic companies.” and client networks. ”
These practices create formidable barriers for new entrants and limit the opportunities for countries like India to carve out a competitive space in key sectors.
what lies ahead
China’s protectionist tactics are not just an obstacle but a calculated attack on India’s ambitions to emerge as a global manufacturing leader. These moves will not only drive up costs for Indian manufacturers but also threaten to dismantle the entire narrative of self-reliance.
Don’t get me wrong. This is just the beginning of the Chinese government’s strategic strategy. As Gokhale points out, this subtle and undeclared enforcement will require concerted action from both government and industry.
Every iPhone assembled in India, every solar panel manufactured, and every semiconductor chip manufactured in India is not just progress, but a statement of intent and a symbol of emerging forces challenging the status quo.
To truly seize this moment, India needs to focus on fostering self-reliance in key areas such as high-tech manufacturing and rare earth mineral processing, areas currently dominated by China.
But for now, New Delhi faces an uphill battle to overcome this crisis. As Gokhale emphasizes, a dual approach of dialogue and deterrence must remain at the forefront of any strategy to counter China’s machinations.
But where will the first flashpoint occur in 2025? Along the Line of Actual Control or deep within India’s industrial heartland? It’s anyone’s guess yet, but one thing is clear: the stakes are higher.
