India's Strategic Electronics Manufacturing Shift and the Role of Chinese Partnerships

India’s electronics manufacturing sector is undergoing a transformative phase, driven by the Production Linked Incentive (PLI) scheme and strategic joint ventures (JVs) with Chinese partners. These partnerships are not only accelerating localization but also enhancing eligibility for PLI benefits, creating scalable ecosystems that position Indian firms as prime candidates for near-term growth and foreign capital inflows.

The PLI Catalyst and Strategic JVs

The PLI scheme, with a total outlay of ₹1.9 trillion (US$26 billion), has become a cornerstone of India’s manufacturing strategy. By offering financial incentives tied to domestic production, it has attracted over $20.3 billion in investments as of March 2025, particularly in semiconductors, EVs, and renewable energy [1]. A key innovation has been the emergence of Indian-majority JVs with conditional Chinese investment, which combine global expertise with local control. For instance, the $10.96 billion Tata-Powerchip semiconductor venture and the Epack-Hisense partnership for appliance manufacturing exemplify this model, enabling technology transfer while adhering to India’s FDI norms [2].

These JVs are structured to allow Chinese equity stakes of up to 26%, ensuring Indian majority control while mitigating geopolitical risks [3]. This framework has facilitated deeper integration into global supply chains, with firms like Dixon Technologies and Kaynes Technology expanding into camera modules, display assemblies, and precision components [4]. The result is a dual benefit: reduced import dependency (e.g., 60% import substitution in critical telecom components) and enhanced domestic value addition [6].

Financial Performance and Scalability

Indian EMS and component firms have demonstrated robust financial performance, driven by PLI incentives and strategic collaborations. Dixon Technologies, for example, reported a 95% year-on-year revenue surge in Q1 2025, with its mobile business segment growing by 125% to ₹11,663 crores [4]. Similarly, Kaynes Technology is projected to exceed ₹30 billion in revenue by FY25, with a 15% EBITDA margin [4]. These metrics underscore the scalability of firms leveraging JVs to access Chinese supply chains and PLI benefits.

The PLI scheme’s focus on backward integration has further amplified growth. By incentivizing localization of subcomponents—such as display modules and battery enclosures—Indian firms are reducing reliance on Chinese imports, which currently account for 70–75% of the market [1]. For example, the Dixtel Infocomm JV (Dixon and Longcheer) aims to localize smartphone and smartwatch manufacturing, aligning with India’s “China+1” strategy to diversify global supply chains [3].

Challenges and Geopolitical Balancing

Despite progress, challenges persist. India remains heavily dependent on Chinese inputs for upstream goods like semiconductors and display modules, with 55% of electronic parts still imported [2]. Geopolitical tensions, particularly with Pakistan, occasionally delay approvals for Chinese investments, even for proposals aligned with industrial policy [1]. However, the government has shown conditional flexibility, relaxing FDI norms for JVs that demonstrate localization and technology transfer [3].

The PLI scheme’s long-term benefits are evident: by 2025, it has created 1.2 million jobs and attracted $20.3 billion in foreign investment, positioning India as a strategic alternative to China in global manufacturing [5]. This shift is particularly relevant for sectors like EVs, where PLI incentives for battery manufacturing aim to curb reliance on Chinese lithium-ion imports [1].

Investment Outlook

For investors, the convergence of PLI incentives, strategic JVs, and India’s “China+1” positioning presents compelling opportunities. Firms with strong PLI eligibility, such as Vedanta Limited (FY24 revenue: ₹1,417.93 billion) and Bharat Electronics Limited (₹199.05 billion), are well-positioned to capitalize on domestic demand and export growth [4]. Additionally, JVs like Epack-Hisense, projected to generate $1 billion in revenue over five years, highlight the scalability of this model [1].

However, success hinges on navigating geopolitical risks and supply chain bottlenecks. Investors must prioritize firms with diversified supplier bases and robust PLI compliance frameworks.

Conclusion

India’s electronics manufacturing shift is a masterclass in balancing strategic partnerships with self-reliance. By leveraging Chinese expertise through structured JVs and PLI incentives, Indian EMS firms are not only reducing import dependency but also building scalable ecosystems. For foreign capital, this represents a unique window to invest in a sector poised for exponential growth.

Source:
[1] India's Semiconductor Sector Outlook 2025 [https://www.china-briefing.com/china-outbound-news/india-semiconductor-sector-outlook-2025]
[2] Strategic Need for Joint Ventures in India's Electronics [https://www.linkedin.com/pulse/strategic-need-joint-ventures-indias-electronics-sector-raunak-mishra-zvm0c]
[3] Chinese JVs Signal Shift in India's Electronics Manufacturing [https://www.newindianexpress.com/business/2025/Jul/26/chinese-jvs-signal-shift-in-indias-electronics-manufacturing]
[4] Competitive Analysis Report – Indian Semiconductor Sector [https://www.mool.ai/information/conduct-a-competitive-analysis-of-a-leading-semiconductor-company-in-india-focusing-on-its-market-position-strategy-and-future-potential]
[5] India's Economic Resilience Amid U.S.-India Trade Tensions [https://www.ainvest.com/news/india-economic-resilience-india-trade-tensions-strategic-bet-diversification-2508/]