Home-bred electronics maker Lava is in advanced talks for a joint venture with Shanghai-based Huaqin Technology, the world’s largest original design manufacturer (ODM) for mobiles and tablets, industry executives and government officials familiar with the matter said.
The joint venture could be a first for any Indian company since the government announced curbs on Chinese firms in 2020 following the border skirmish between the two Asian neighbours.
Senior executives of Huaqin are set to visit India to finalise the final contours of the deal, which will give Lava a stronghold in the country’s fast developing electronics manufacturing sector, officials said.
Lava is a beneficiary under the production-linked incentive (PLI) schemes for smartphones and IT hardware.
If the Lava-Huaqin joint venture becomes a reality, it will be a boost for the electronics industry in the country.
As per officials, the joint venture will target to serve top US and Chinese customers for R&D, product design, supply chain and manufacturing of their multiple product categories. “This partnership has the potential to create a Fortune 500 company that shall employ more than hundred thousand people and put India on the global map for design, supply chain and manufacturing,” said an official.
The people further said Lava has started work for setting up the manufacturing unit and the senior leadership of both companies will visit Uttar Pradesh, Haryana, Tamil Nadu, Andhra Pradesh and Karnataka for finalising the site.
“The deal is in its final stages and could be announced soon,” said an official, on condition of anonymity. Queries sent to Huaqin remained unanswered at the time of going to press while Lava did not offer any comment.
However, after finalising the deal, the company needs to take approval from the government before starting work on setting up a manufacturing unit.
On April 17, 2020, the finance ministry had amended the country’s foreign direct investment (FDI) policy for countries sharing land borders through Press Note 3 to only allow inflows through the government route with the necessary approvals. This took place amid heightened Sino-Indo tensions and was aimed at discouraging investments from companies based in China.
During the same time, India’s PLI schemes on electronics manufacturing, including smartphones and IT hardware, were designed to attract global manufacturers based in China. But for that to happen, partners such as component makers, also mainly from China, need to shift to India. That’s proving difficult because of the rules. The electronics industry has been seeking relaxations in the rules, so that an ecosystem can be developed in India.
“A clarity on FDI policy needs to be defined in view of the press note (Press Note 3 of 2020) to facilitate shifting of companies, which will help create the ecosystem, (bring) investments, create jobs, facilitate skill improvement, and help develop the overall sector,” Indian Cellular and Electronics Association (ICEA) chairman Pankaj Mohindroo had said in a letter to the Prime Minister’s Office (PMO) in June this year.
As per ICEA, given the massive dependency on China for finished products, especially IT hardware, it was impossible to create a relocation pathway to deepen global value chains in India, without tier 2 and 3 manufacturers for finished products, sub-assemblies and components from China.
