Prabowo Widodo
India on Thursday granted its official approval to a significant manufacturing joint venture between China’s Vivo and indigenous electronics manufacturer Dixon Technologies. This pivotal decision is poised to usher in the next dynamic phase of the country’s burgeoning smartphone manufacturing sector, building upon the foundational success established by tech giant Apple, which has played a crucial role in transforming India into a global hub for smartphone production.
The green light from New Delhi now permits Vivo to advance with a manufacturing partnership that had been initially announced in late 2023 but subsequently faced delays. The deferment was primarily due to stringent investment regulations introduced by the Indian government in 2020, which mandate enhanced scrutiny for foreign direct investments originating from nations sharing a land border with India—a category that notably includes China. Under the terms of the joint venture, which outlines a 51/49 ownership structure with Dixon holding the majority stake, the newly formed entity will acquire specific manufacturing assets from Vivo. Its mandate will encompass the production of a substantial portion of Vivo’s smartphone orders within India, alongside the flexibility to manufacture electronic products for other brands. This strategic arrangement was formally communicated through a stock exchange filing by Noida-based Dixon, India’s largest electronics manufacturing services (EMS) company.
A New Template for Chinese Investments in India
The 51/49 ownership model, which grants majority control to Dixon, is indicative of a broader strategic recalibration among Chinese smartphone brands operating in India. Facing a complex regulatory environment and heightened scrutiny, these companies are increasingly opting for local partnerships to expand their manufacturing footprint. For an industry keenly observing the delicate balance between foreign capital and domestic manufacturing capabilities, analysts widely believe this ownership structure could serve as a precedent. It presents a viable template for similar collaborations across the electronics sector, potentially broadening India’s narrative as a smartphone manufacturing powerhouse beyond its current strong association with Apple and its ecosystem. This strategic pivot is seen as a way for Chinese brands to mitigate regulatory risks while aligning with India’s overarching industrial policy objectives.
India’s Ascent as a Global Manufacturing Hub: The ‘Make in India’ Imperative
Over the past several years, India has dramatically emerged as a preeminent global hub for smartphone manufacturing. This transformation is largely attributable to a concerted national effort, epitomized by the ‘Make in India’ initiative, coupled with significant investments by global players. Apple, in particular, alongside its extensive network of suppliers, has been instrumental in this shift, substantially expanding its iPhone production capabilities within the country. This expansion is part of a broader global strategy by Apple to diversify its supply chains, reducing its reliance on any single manufacturing base, particularly China.
Government-backed incentive schemes, most notably the Production Linked Incentive (PLI) scheme for large-scale electronics manufacturing, have been pivotal in attracting leading global electronics manufacturers to Indian shores. Launched in 2020, the PLI scheme offers financial incentives ranging from 4% to 6% on incremental sales of manufactured goods over a five-year period, with 2019-20 as the base year. This has significantly boosted India’s appeal, encouraging both domestic and international companies to establish or expand their production units. The scheme aims not only to boost manufacturing output but also to enhance local value addition, generate employment, and position India as a competitive global exporter of electronics.
Apple’s commitment to India has been steadfast and strategic, with the company spending years meticulously building its manufacturing footprint. According to data shared by Counterpoint Research, Apple today accounts for a remarkable 57% of India’s smartphone exports by volume. This figure underscores the immense success of the ‘Make in India’ program in attracting high-value manufacturing and integrating India into global tech supply chains. In contrast, Chinese brands, despite their overwhelming dominance in India’s domestic smartphone sales market—commanding an impressive 72% share—contribute less than 10% to the country’s total smartphone exports. This stark disparity highlights a significant untapped potential, indicating substantial upside if Chinese manufacturers can replicate Apple’s export-oriented manufacturing model from India.
Geopolitical Context and Regulatory Shifts
The trajectory of Chinese smartphone brands in India has been shaped not only by market dynamics but also by complex geopolitical realities. Following border clashes between India and China in 2020, New Delhi significantly tightened its investment rules for neighboring countries. These revised regulations introduced an additional layer of governmental scrutiny for foreign direct investment (FDI) originating from nations sharing a land border, directly impacting Chinese firms. This move was part of a broader strategy to safeguard national security and promote domestic industrial growth.
In recent years, several prominent Chinese smartphone companies operating in India, including Oppo, Vivo, and Xiaomi, have also faced a series of tax and regulatory investigations. These investigations, often related to alleged tax evasion, customs duty violations, or illegal remittances, have created an environment of heightened regulatory pressure. Such experiences have compelled Chinese brands to reassess their operational strategies in India, making the prospect of ceding majority control to an Indian partner an increasingly attractive and sustainable path forward. This approach offers a degree of insulation from direct regulatory scrutiny, fostering a more stable and predictable operating environment.
Dixon Technologies: A Pillar of India’s Electronics Manufacturing Ambition
The joint venture with Vivo represents a significant milestone for Dixon Technologies, India’s largest electronics manufacturing services (EMS) company. For Dixon, this partnership is not merely about expanding capacity; it is a strategic move that reinforces its position as a cornerstone of India’s ambitious electronics build-out. The company has been at the forefront of ‘Make in India’ initiatives, consistently securing contracts from both global and domestic brands.
During its May earnings call, Dixon’s Managing Director, Atul Lall, projected that the Vivo venture could add an annualized manufacturing volume of approximately 20 million to 22 million smartphones. This estimate is based on Vivo’s current sales figures and signifies a substantial volume bump for the publicly traded company, whose growth trajectory is increasingly linked to its ability to secure such high-profile manufacturing contracts. Dixon’s established expertise and robust infrastructure make it an attractive partner for international brands looking to navigate India’s manufacturing landscape. The company already manufactures smartphones for Xiaomi, further solidifying its expanding role as a trusted manufacturing partner for a diverse range of smartphone brands in India. This track record positions Dixon as one of the most reliable and capable players in India’s burgeoning electronics ecosystem.
Implications and Future Outlook for India’s Smartphone Industry
The approval of the Dixon-Vivo joint venture carries multifaceted implications for India’s smartphone industry and its broader economic landscape.
Economic Growth and Employment: The increased manufacturing capacity and localization efforts are expected to generate a substantial number of direct and indirect jobs, from factory floor workers to supply chain logistics and R&D. This aligns perfectly with the ‘Make in India’ program’s objective of creating large-scale employment opportunities for India’s vast workforce.
Value Addition and Ecosystem Development: While India has excelled in smartphone assembly, the next phase focuses on increasing local value addition by manufacturing more components domestically. Partnerships like Dixon-Vivo can spur the development of a deeper local supplier ecosystem for components such as printed circuit boards (PCBs), camera modules, and displays, reducing reliance on imports and fostering indigenous technological capabilities.
Export Potential: The shift towards majority Indian-owned manufacturing structures, coupled with policy alignment, is anticipated to unlock greater export potential for Chinese brands. As Tarun Pathak, research director at Counterpoint Research, noted, the majority-Indian-owned structure provides Vivo with greater policy alignment while giving Dixon the scale to deepen local value addition and pursue exports. This could significantly bridge the current gap between Chinese brands’ domestic market dominance and their minimal export contribution, turning India into a key export base for these global players.
Diversification of Global Supply Chains: The success of India in attracting major manufacturers and fostering local partnerships contributes significantly to the global trend of supply chain diversification. For international brands, having production bases outside of traditional manufacturing hubs offers resilience against geopolitical shocks, natural disasters, and trade disputes, enhancing overall supply chain security.
Policy Validation: The approval of this joint venture serves as a strong validation of India’s industrial policies, particularly the PLI scheme and the stricter FDI rules for bordering nations. It demonstrates that the government’s approach, while cautious, is yielding results in attracting investment under terms that prioritize national interests and domestic participation.
Enhanced Competition and Innovation: A more robust and diverse manufacturing base in India could foster greater competition and innovation. As local capabilities grow, companies will be incentivized to invest more in R&D, product development, and technological advancements to maintain their competitive edge in both the domestic and international markets.
While the path forward may still present challenges, including scaling infrastructure, ensuring consistent quality, and navigating global economic fluctuations, the Dixon-Vivo joint venture marks a significant evolutionary step. It signifies a strategic alignment between global manufacturing ambitions and India’s national industrial objectives, setting a promising precedent for the future of electronics manufacturing in the country. The approval underscores India’s growing confidence in its manufacturing capabilities and its strategic positioning in the global technology landscape, moving beyond assembly towards becoming a comprehensive production and export hub.
