Dixon’s JV with Chinese firm gets govt nod, other Indian companies may follow

Kolkata | New Delhi: Several electronics contract manufacturers in India are plotting partnerships with Chinese companies, enthused by the Centre's nod to a joint venture between Dixon Technologies and Chinese original design manufacturer (ODM) Longcheer Intelligence.

Dixon, the top homegrown electronics contract manufacturer, said late Thursday that it has secured Ministry of Electronics and Information Technology (MeitY) approval to form a joint venture with Longcheer which will be 74% owned by the Indian company and 26% by the Chinese partner.

Encouraged by the development, other Indian companies such as Epack Durable, PG Electroplast, Amber Enterprises, and Karbonn Mobile are looking to proceed with plans to ink similar JVs with Chinese firms, industry executives said.

For the domestic electronics industry, the Dixon approval signals a softening of the Modi government's stance on allowing Chinese firms to join the burgeoning manufacturing footprint in the country. The industry was closely following the fate of Dixon's JV proposal.

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Currently any application with a Chinese entity needs multi-ministry government approval under the Press Note 3 (PN3) norms.

“The industry needs 1-2 cases of Chinese joint venture approvals before forming similar partnerships with Chinese companies,” said the chief executive of a leading contract manufacturer. “Dixon’s approval will now help everyone. Chinese companies are more comfortable with joint ventures than just technology licensing.”

Mobile phone manufacturer Karbonn is finalising a JV with a Chinese company for component manufacturing, on the lines of the Dixon proposal where the foreign partner will own 26%, a senior official said.

Contract AC and TV manufacturer PG Electroplast managing director (operations) Vikas Gupta said the Dixon approval is a positive for the industry since the Indian electronics industry needs technology and support from Chinese companies. He said the company will now explore equity partnership with Chinese firms for the electronics component manufacturing scheme. Meanwhile, Dixon is awaiting government approvals for two other Chinese JV proposals—with HKC to manufacture display modules, and smartphone brand Vivo for assembling handsets.

According to Dixon, the MeitY approval was issued under the Foreign Exchange Management (Non-Debt Instruments) Rules, 2019, and the government’s Press Note 3, 2020, which states that an entity of a country sharing land border with India, can invest only after receiving PN3 approval from the government. The proposal was approved on July 23, it said.

ET reported in its July 21 edition that the Centre is likely to support Chinese investments in the electronics sector, only through JV agreements, after the industry’s request to ease the process. The government has however pushed for technology transfers instead of only setting up assembly units. Niti Aayog has also recently proposed easing curbs on Chinese investments in India.

The government’s move also comes close on the heels of external affairs minister S Jaishankar’s meeting with his Chinese counterpart Wang Yi in Beijing. Post the meeting, India, for the first time in five years, resumed issuing tourist visas to Chinese citizens from July 24.India had imposed the curbs following the Galwan valley clashes in mid-2020 and issued PN3 norms that require multi-department approvals for investments from businesses and entrepreneurs based in land bordering countries such as China.

This forced Chinese compressor maker Highly Group and Voltas to scrap a JV agreement in which the Chinese partner was to hold 60% two years ago as the proposal did not get the government’s PN 3 approval. Renewed attempts by both companies to form the JV could not materialise in the absence of clear signals from the government though the talks can be revived again, an industry official said.

Indian companies have been pushing for a review of trade ties with China, particularly concerning PN3. Joint ventures with Chinese companies are crucial for the success of the recently announced Rs 22,000-crore electronics component manufacturing scheme, experts said. The government is expected to extend the July 31 deadline to apply under the scheme as potential participants race to ink JV pacts to acquire expertise in manufacturing electronics components and sub-assemblies.