Luxshare, one of Apple’s largest Chinese manufacturers of components and finished products, is shifting its new $330 million investment to Vietnam from India, where it failed to expand its business, according to media reports.
Chinese experts said the shift indicated the growing protectionism of the Indian market against foreign investors, especially those from China, which will affect the integrity of Apple’s supply chain in India and shatter the confidence of other investors in the South Asian market.
After several failed attempts to expand its operations in India for nearly three years, Luxshare has decided to move a new $330 million investment to Bac Giang in Vietnam, Indian media outlet Business Standard reported on Thursday.
The investment licence was approved by the Vietnamese government last week. This brings its total investment in Vietnam to $504 million, the report said.
The Chinese technology company will manufacture various products ranging from cables for smartphones and communication devices to touch phones and smart watches in the country, according to the report.
Luxshare Precision’s withdrawal reflects a firm decision after facing numerous challenges during its years of operation in India, Chinese experts said.
“This decision may affect manufacturing companies in Apple’s supply chain and the entire supply chain for Apple phones in India,” Liu Zongyi, secretary-general of the Research Centre for China-South Asia Cooperation at the Shanghai Institutes for International Studies, told the Global Times on Sunday.
Similar cases have occurred in other sectors. Chinese carmaker BYD has reportedly told its Indian joint venture partner that it will shelve plans for a new $1 billion investment to build electric cars after its investment proposal came under scrutiny from New Delhi, Reuters reported on 28 July, citing people with knowledge of the discussions.
BYD was planning to expand into the manufacture and assembly of electric vehicles in Vietnam, media reports said.
The Indian government’s crackdown on Chinese companies has been relentless. For example, Indian police have accused Chinese smartphone makers Xiaomi and Vivo of helping to illegally transfer funds to a news portal under investigation for “spreading Chinese propaganda”, a charge the Chinese companies have strongly denied.
India’s increased scrutiny of Chinese companies has gone as far as interfering in the appointment of senior executives in Chinese companies and restricting visas for Chinese personnel, among other measures.
The withdrawal also indicates a lack of understanding of the Indian market by some international investors, Liu said.
“India continues to put obstacles in the way of foreign investors, which especially affects the confidence of Chinese companies,” Liu said.
The deteriorating business environment for Chinese companies in India has been marked by constant inspections, investigations, personnel restrictions and visa denials – as seen at Chinese automaker BYD’s Indian electric vehicle assembly plant, which has no Chinese personnel.
This situation is seriously affecting the normal operation and confidence of Chinese companies in the country, a senior industry insider based in India told the Global Times on Sunday on condition of anonymity.
Some companies in India are exploring alternatives by investing in markets such as Vietnam, Mexico, Europe and other regions.
“India is not the only option for Chinese companies to expand globally, and choosing other markets seems to be a prudent decision under the circumstances,” the insider said.
The implementation of ‘Make in India’ relies heavily on foreign investment and external technology support. The Indian government’s ratcheting up of nationalist sentiment goes against normal business practices, Chinese experts noted.
“The Indian government’s protectionism poses numerous risks and challenges to the country’s ambitious plans to become a major manufacturing hub,” Qian Feng, director of the research department at Tsinghua University’s National Strategy Institute, told the Global Times on Sunday.
“In the long run, it is likely to lead to regrets as it deviates from standard economic principles,” Qian said.
