China's recent export control measures reflect its growing concern over India's burgeoning manufacturing capabilities and the potential for increased competition, particularly within the technology sector. A series of stringent restrictions have been implemented, aimed squarely at hindering key industries, including Apple's iPhone production, and disrupting collaborative ventures between Chinese and Indian firms.
On January 10, 2025, reports surfaced indicating China barred its employees from traveling to Foxconn's iPhone factories located in India, leading to the recall of those already stationed there. This move aligns with China's decision to halt shipments of specialized manufacturing equipment for producing iPhones bound for India, with authorities refusing to approve the necessary exports. The restrictions aim to stall Apple's aspirations of manufacturing the upcoming iPhone 17 in India, significantly impacting its supply chain operations.
These actions are infused with Beijing's apprehension of India's potential to emerge as a formidable manufacturing hub for Western multinationals. Such developments pose national security threats to India, as they directly interfere with its strategic economic ambitions. Apple, having turned India increasingly pivotal, currently manufactures 14 percent of global iPhone units—a share anticipated to grow to between 25 and 40 percent. For India, this not only signifies economic growth but also reduces its dependency on China for electronics manufacturing.
China's apprehensions are rooted deeply within employment dynamics and historical contexts tied to its production powerhouses. At its zenith during the financial year 2017-2018, Foxconn's factory boasted employment numbers nearing 350,000. This supply chain network, connecting 150 suppliers across industrial hubs like the Yangtze River and Pearl River deltas, played a pivotal role in supporting millions of grassroots workers throughout the Chinese economy. Yet, as of 2023, Foxconn had laid off more than 200,000 employees, as many suppliers experienced bankruptcies or diversified operations away from traditional practices.
Meanwhile, Apple's increasing investments have invigorated India's tech industries; Foxconn alone has invested $10 billion, establishing substantial employment for local workers. Production metrics have improved remarkably, with defect rates at Indian facilities now aligning closely with those of Chinese counterparts. The upcoming iPhone 17 is projected to incorporate advanced features such as machine learning and AI to upgrade its service capabilities, fostering competition not only technologically but also economically.
China's concerns extend beyond smartphones; similar restrictions are noted within the Tunnel Boring Machines (TBMs) sector. Indian Minister Piyush Goyal highlighted these export restrictions against German manufacturer Herrenknecht AG at negotiations with German leaders. TBMs are integral to India's extensive infrastructure projects, yet China's customs clearance practices have increasingly delayed and complicated shipments. Beijing views these machines as strategic assets for enhancing military movements along the Line of Actual Control (LAC) with neighboring states.
The categorical ban on germanium and gallium exports dating back to 2023 has major ramifications for India. Both minerals, employed widely within semiconductor production, represent strategic materials within global supply chains. India's reliance on these imports presents challenges, as traders resort to rerouting sources through more costly avenues, increasing expenses and complications relating to logistics.
Historically, prior to the Galwan Conflict, China had favored non-tariff barriers, employing measures to obstruct Indian imports across various sectors, including pharmaceuticals and agriculture. The discourse over these tactics suggests not only the intention to disrupt India's economic processes but also to exert leverage amid bilateral negotiations. This shifting dynamic reveals China's apprehension over the outflow of technology and manufacturing jobs from its economy.
China appears to deploy these overseas export control tactics to signal its disapproval of India's economic maneuvers against Chinese corporations, particularly amid recent efforts whereby India sought to limit Chinese investments. The ultimate goal might revolve around preventing the exodus of high-tech industries from China, which threaten to destabilize its own economic foundation, especially against increasing unemployment and radical shifts within its labor market.
Lastly, China's approach to export denial strategies serves somewhat as experimental tactics, measuring India's resilience and responses within international trade contexts. Historical precedents demonstrate mixed results for China's economic sanctions, leading to speculation concerning the efficacy of current measures against India.
India's proactive advancement within tech manufacturing calls for comprehensive strategies to counteract China's export restrictions. Through the strengthening of local production and the diversification of supply chains, India is positioning itself to navigate these challenges effectively. The interaction between these two major economies will continue to shape the manufacturing and technological landscapes across Asia, with China asserting its dominance through export controls, and India solidifying its growing influence amid competitive dynamics.
Atul Kumar, Fellow of the Strategic Studies Programme at the Observer Research Foundation, articulates the potential consequences these actions may have on both nations' economies and global market trends.