apple china vendors: Government may let Apple’s select China vendors set up plants in India

The government may allow Apple’s Chinese vendors to set up manufacturing plants in India on a case-by-case basis after ensuring that the Cupertino-based iPhone maker has no other option to source components, said officials with knowledge of the matter.

They said that the government is open to investments by Chinese entities that offer technology and production capabilities for which there is no alternative available.

“If there is no alternative to the technology a vendor has to offer, the government has no issues in allowing it unless there are some concerns about the entity,” said one of the officials.

If there are some concerns about the vendor and there is no alternative available, the Indian manufacturer will need to import the components. The government would also suggest a transfer of technology for local manufacturing, a model it had followed in the case of investments from China, the official said. “We have asked them (Apple) to furnish a list of vendors,” the official said, adding that these would be vetted before the government gives its nod.

Apple didn’t respond to queries.

The government has been urging the world’s most valuable company to bring its entire manufacturing ecosystem to India spanning iPhones, iPads, and computers.

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The company that recently launched the iPhone 14, the latest iteration of its largest-selling product, has been progressively scaling up Indian production to lower reliance on China.

Analysts and industry executives estimate the December quarter will mark Apple’s highest-ever shipment of iPhones to India at around 570,000 units compared with 370,000 units last year, ET reported earlier this month.

However, Apple continues to import many components. India had in April 2020 amended the foreign direct investment (FDI) policy and made a prior government nod mandatory for foreign investment from countries sharing a land border with it, a measure that was seen largely targeted at Chinese investments.

The Department for Promotion of Industry and Internal Trade (DPIIT), while making the change, said in its press note that this was aimed at “curbing opportunistic takeovers/acquisitions of Indian companies due to the current Covid-19 pandemic.”

These changes to the FDI policy implied that any foreign direct investment from Bangladesh, China, Pakistan, Nepal, Myanmar, Bhutan, and Afghanistan needed prior government approval, irrespective of the FDI cap applicable to the sector. Prior approval was made mandatory for sectors that were otherwise on the automatic route. This applied even to indirect FDI from these countries routed via others.

An inter-ministerial committee set up to look at proposals involving FDI from China has so far cleared investments in Citizen Watches Co, Nippon Paint Holdings and Netplay Sports.

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