Indian electronics sector is losing Rs 1.25 lakh crore due to tensions between India and China

Escalating tensions with China are said to have cost Indian electronics makers $15 billion ( ₹The Economic Times reported that there has been a loss of Rs 1.25 lakh crore in production losses and 100,000 jobs in the last four years.

This comes amid prolonged delays in issuing visas to Chinese nationals and government investigations into Chinese companies operating in India.

In submissions to various ministries, the electronics industry has said that India has also lost $10 billion ( ₹The report shows an export opportunity of Rs 83,550 crore and apart from that, an additional value loss of $2 billion.

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According to industry executives, 4,000-5,000 visa applications from Chinese executives are currently awaiting government approval, hampering the expansion plans of India’s electronics industry.

This is despite India having established a mechanism to process business visa applications within 10 days.

Lobby groups of the Indian Mobile and Electronics Association (ICEA) and Manufacturers Association of Information Technology (MAIT) are urging the Center to expedite visa issuance for Chinese executives, which currently takes over a month.

Executives say these managers are needed to transfer technology and skills, install and run production units, set up processes to increase efficiency and perform maintenance. There is also a backlog of visa applications for management teams of Chinese companies invited to set up manufacturing units here in partnership with local companies, executives told the Economic Times.

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“Our domestic value addition (DVA) plan has been seriously disrupted. When the PLI (Production Linked Incentive) program for mobile phones was launched in 2020-2021, it was expected that the supply chain would shift from China. “However, due to this impasse and Press Note No. 3 (ordering greater investment control by countries sharing a land border with India), supply chain shifting has been severely curtailed,” ICEA said.

According to the report, the association represents leading mobile phone brands and manufacturers such as Apple, Oppo, Vivo, Dixon Technologies and Lava.

ICEA estimates that normal economic activity between India and China would increase value addition for Indian companies from the current 18% to 22-23%, leading to additional growth ₹₹15,000 crore annual contribution to the country’s mobile ecosystem.

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“We are cautiously optimistic about a balanced resolution that addresses industry concerns and balances national security interests,” Pankaj Mohindroo, chairman of ICEA, told the Economic Times. “The industry does not demand kowtowing to any nation, but to recognize that the path to Atmanirbharta depends on moving up in the China-dominated value chain.”

He added that while India has offset several disadvantages and become more competitive, it is still experiencing a new form of disadvantage compared to countries such as Vietnam, Malaysia and Mexico, which have free access to capital, technology and skills from China.

Industry officials say even Chinese nationals are afraid to come to India for fear of arrest and interrogation. “If you need 50 engineers to come to India to help set up a factory, only about 10 are willing to come,” an industry official told the Economic Times on condition of anonymity.

He added that since 2020, due to the deterioration of the geopolitical situation and intense control of businesses run by Chinese companies, these companies have been suspending further investments in India, hindering further development of the supply chain.

“If these companies decide to leave India, it will have a serious impact on the availability of products and services to consumers, loss of employment and closure of large production capacities,” the director added.

For example, a large Chinese manufacturer committed to building a factory in India to produce Apple iPads, but ultimately moved to Vietnam, where it now produces $8-10 billion ( ₹The report says iPads are worth between Rs 66,840 and Rs 83,550 crore per year.

Chinese smartphone brands are also wary of participating in India’s flagship PLI program for mobile devices, which could result in lost business opportunities, executives say.

“If Chinese companies were not discouraged from participating in mobile PLI, we (India) could have generated additional export revenues of at least $5-7 billion ( ₹41,775-58,485 crore) as of 2020.” – said another director.

The report says the demand for Chinese executives to set up manufacturing units in India will further increase if the government approves the PLI scheme for electronic component manufacturing.

The electronics manufacturing industry was looking for ₹PLI package of Rs 30,000-35,000 crore for manufacturing of components and subassemblies along with capital expenditure cover to support the expected figure of $75-80 billion ( ₹6.26-6.68 lakh crore) demand for electronic components by 2026 to reduce heavy import dependence and improve the country’s trade deficit with China.

“For some components, the semiconductor industry in Korea and Taiwan can be helpful in transferring technology for semiconductor parts, but for components such as the display or battery cell, the major contribution comes from China, which has cutting-edge technology. If we need to locate them, definitely help the Chinese with training and skills, equipment and more,” said an industry executive.

According to a report by the Global Trade Research Initiative (GTRI), India’s imports of electronics, telecommunications and electrical products rose to $89.8 billion in FY 2023-24, of which 44% came from China and 56% from Hong Kong. released in May.

For comparison, imports worth $7.9 billion ( ₹66,004 crore) during 2007–2010 which increased to USD 23.3 billion ( ₹(1.94 lakh crore) in 2020-2022, according to Economic Times.