15 February 2025 : The Hindu Editorial Analysis

Dealing with China’s weaponization of e-supply chains

(Source – The Hindu, International Edition – Page No. – 6)

Introduction

• These restrictions have severely impacted production, as China has a monopoly on certain high-tech manufacturing equipment.
• Taiwanese workers have been brought in to fill the gap, but the lack of specialized equipment is a major hurdle.

Geopolitical Competition and China’s Strategy

• China is using economic tools to slow down India’s manufacturing growth.
• By limiting the transfer of technical knowledge from Chinese workers to Indian workers, China aims to maintain its advantage.
• The restrictions on specialized machinery disrupt production, making it harder for India to establish itself as a global manufacturing hub.
• China’s actions ensure that global companies remain dependent on its supply chains.

India’s Role in the China Plus One Strategy

• Global companies are reducing reliance on China by diversifying production to other countries, including India, Vietnam, and Mexico.
• India has been a key destination for this shift, as its manufacturing sector is growing in a way similar to China’s past development.
• China wants to limit India’s rise as a competitor and remind global companies of its own critical role in production.

India’s Efforts to Attract Manufacturing Investments

• The Indian government has actively supported the expansion of major smartphone manufacturers in South India.
• In 2023, advanced smartphone models were assembled in Indian factories.
• In the fiscal year ending March 2024, India assembled smartphones worth $14 billion.
• For the first time, a high-end smartphone model was assembled in India in 2024.
• State governments in South India have prioritized investments in smartphone manufacturing.

India-China Relations and Economic Dependency

• India and China agreed on military patrolling rules in October 2024, after four years of tensions in eastern Ladakh.
• Despite diplomatic progress, China’s economic actions show that geopolitical competition will continue.
• India still depends on China for manufacturing components and machinery, influencing negotiations.

India’s Long-Term Strategy

• In the short term, India should work with global companies to negotiate with China.
• In the long term, India must focus on developing its own supply chains and technical expertise.
• Currently, India mainly does final assembly of smartphones; to become a full-scale manufacturing hub, local industries must grow.
• The National Manufacturing Mission is a step forward but requires strong financial support to build industrial clusters.
• Skill development programs and on-site training should focus on industry-specific specializations.
• Encouraging private investment will help create a strong network of Indian contract manufacturers for both foreign and domestic brands.