China’s Withdrawal of 300 Chinese Employers: Implication for India

Context: Recently, China recalled 300 skilled engineers from Foxconn’s iPhone manufacturing in India and restricted rare earths, equipment, and skilled training.

Possible Reasons Behind Recalling 300 Chinese Engineers

• Curtail Technology Transfer: Prevent Indian manufacturing units — particularly in high-value electronics like iPhones — from acquiring the specialised know-how these engineers possess (production line setup, optimisation, troubleshooting).
• Delay India’s Manufacturing Take-off: Slow down India’s ambition to become a competitive electronics manufacturing hub.
• Maintain Supply Chain Dependence: Ensure India remains reliant on Chinese inputs, equipment, and rare earth materials.
• Preserve Chinese Economic Hegemony: Block potential competitors to safeguard Beijing’s dominant position in Asia’s manufacturing and export markets.
• Leverage Domestic Economic Pressures: China’s slowing economy, ageing population, and overcapacity make protecting export revenues crucial. Neutralising emerging rivals is part of its survival strategy.

How India Can Be Impacted

• Short-term operational disruption: Loss of skilled engineers will slow down production ramp-ups, delay projects, and increase dependence on foreign (often Chinese) technical support.
• Higher costs & slower growth: Alternative sources for inputs and equipment are more expensive and less efficient, increasing Capex/Opex for Indian firms.
• Global supply chain hesitation: Companies may hesitate to shift production from China to India, fearing instability and inefficiency.
• Persistent trade imbalance: Electronics imports (42% from China) and the $60 billion trade deficit in electronics could worsen before improving.
• Longer decoupling timeline: Achieving self-reliance in electronics could take 5–7 years, even with aggressive policy support.

What India Can Do

• High-level coordination: Create a PMO-led inter-ministerial task force (similar to the 2019 PLI committee) to handle supply chain challenges across ministries and in close consultation with industry.
• Diversify supply sources: Build partnerships with Taiwan, Japan, South Korea, the US, and the EU for critical minerals, components, and manufacturing equipment.
• Strengthen domestic ecosystem: Invest in R&D, skill development, and infrastructure for electronics and component manufacturing, not just assembly.
• Accelerate PLI & allied policies: Expand production-linked incentives beyond smartphones to semiconductors, components, and high-tech manufacturing.
• Strategic stockpiling: Maintain reserves of critical inputs (rare earths, key components) to withstand supply disruptions.
• Global alliances: Work with Quad, Indo-Pacific Economic Framework for Prosperity (IPEF), and other like-minded partners to reduce dependence on China for high-tech inputs.
• Ease business bottlenecks: Cut bureaucratic delays, improve logistics, and address “higher disabilities” in costs to make India more attractive for global value chains.

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