India’s China+1 Dilemma: It May Need China to Depend Less on China

The agreement creates a smartphone joint venture between Dixon Technologies, an Indian company, and Vivo’s Indian arm, which is Chinese-owned. Dixon holds 51 percent, while Vivo holds 49 percent. The partnership is meant to expand smartphone manufacturing in India. Its importance lies in the tension between Indian ownership and Chinese manufacturing expertise.

The venture was first announced in December 2024 but received approval nearly 19 months later. That delay reflects the scrutiny Chinese money attracts in India. Since 2020, investment from countries sharing a land border with India has generally required government approval. Political tensions after the Galwan Valley clash made this scrutiny stronger.

The approval does not prove that the venture will transfer technology or develop Indian suppliers. Its value will depend on whether it builds engineering skills, supplier capabilities, competitive component production, and access to markets. A 51 percent Indian stake helps, but ownership alone guarantees little.

The China+1 strategy is a manufacturing approach that adds another country, such as India, alongside China. It is designed to reduce exposure to disruption, political risk, or excessive dependence on one production location. It does not necessarily mean abandoning Chinese factories or suppliers.

The article’s interviews show that executives usually described a portfolio rather than an exit. One automotive executive envisioned two supply chains for the same product, with one coming from India and one from China. Companies can add Indian assembly while still relying on Chinese components, machines, materials, and technical expertise.

Leaving China entirely is difficult because China has a mature local supply chain. India and Southeast Asia do not yet have the same depth. Therefore, China+1 often produces managed dependence: India gains capacity and another production site, but Chinese inputs remain important. The long-term test is whether India develops more capabilities and choices.

Chinese equity investment into India fell sharply between 2018–19 and 2024–25. It declined from about $229 million in 2018–19 to $2.67 million in 2024–25. This change shows how strongly investment screening, political uncertainty, and restrictions affected Chinese participation in India.

The main mechanism was India’s investment policy. Press Note 3, introduced in April 2020, made investment from countries sharing a land border with India subject to government approval. After the June 2020 Galwan Valley clash, India also restricted Huawei’s 5G participation and banned hundreds of Chinese apps. These actions increased caution around Chinese capital.

The lower investment figure did not remove India’s dependence on Chinese production. Indian manufacturers continued importing components, equipment, and materials from China. The result was a contradiction: Chinese ownership became harder, while Chinese industrial inputs remained necessary. In March 2026, India relaxed parts of its screening rules, but approval requirements for direct Chinese investment remain.

When India restricts Chinese investment while relying on Chinese inputs, it separates ownership from production. Chinese firms may be kept out of factories, yet Indian manufacturers still need Chinese components, machines, materials, and technical workers. This can make the supply chain less flexible rather than more independent.

India’s electronics boom illustrates the mechanism. Smartphone assembly and exports have grown quickly, but many inputs still arrive from China. In July 2025, Foxconn reportedly asked hundreds of Chinese engineers and technicians to return home, and more than 300 had already left Indian iPhone operations. The episode exposed India’s reliance on skills based in China.

Restrictions can also discourage Chinese suppliers from setting up locally. Several interviewees linked investment screening, visa restrictions, and political uncertainty to that effect. India may therefore keep importing products it could eventually make domestically. The practical goal is managed dependence: attract useful capabilities while building alternative suppliers and reducing disruption risks.

A mature manufacturing supply chain contains many connected capabilities. These include component makers, equipment producers, materials suppliers, engineering workers, logistics systems, and customers. China’s strength comes from having these pieces operating together at scale. India is developing them, but the article says the equivalent local supply chain does not yet exist.

This matters because a factory depends on more than its final assembly line. Indian smartphone production has expanded, yet many components, machines, and materials still come from China. Chinese engineers and technicians also provide skills that Indian operations may not yet have in sufficient numbers. Recreating every layer requires time, investment, learning, and reliable demand.

India can build this base gradually through carefully chosen investment. Chinese participation may help if it develops Indian suppliers, transfers engineering knowledge, and supports competitive component production. But assembly capacity alone is not enough. India also needs suppliers from Japan, South Korea, Taiwan, Europe, and elsewhere to create more choices.

Indian majority ownership matters because it gives Dixon control over the joint venture, but control is not the same as capability. For the partnership to strengthen India, Chinese participation must add knowledge and industrial depth. Otherwise, the venture could simply assemble products in India while importing most of its valuable inputs.

The key mechanism is capability building. Chinese involvement should develop Indian engineers, suppliers, and component production. It should also improve access to technology and markets. These outcomes would make Indian firms less dependent on imported inputs and better able to compete. The article specifically warns that a 51 percent stake guarantees no meaningful technology transfer by itself.

The current test for Dixon–Vivo is therefore practical, not symbolic. India should examine what skills, suppliers, equipment, and production knowledge remain in India. Security-sensitive activities still deserve tight scrutiny, while ordinary manufacturing needs predictable rules. The desired result is more Indian capability and more choices, not permanent dependence on Chinese firms.

A global manufacturing supply chain is the network through which different countries provide the materials, components, machines, skills, and assembly needed to make a product. One product can therefore be assembled in India, use Chinese components, and depend on equipment or expertise from several other countries. The article presents smartphones as a clear example.

Countries manage these links because no country necessarily has the best or most efficient source for every input. China’s mature supply chain can provide scale and local suppliers, while India may offer a growing manufacturing base and a large domestic market. Trying to make everything at home could cost more, take longer, and duplicate capabilities unnecessarily.

The risk is excessive dependence on one country. Disruptions, political tensions, worker shortages, or supplier problems can affect production. India’s preferred approach is managed dependence: build domestic capability where it can compete, use suppliers in Japan, South Korea, Taiwan, Europe, and elsewhere, and retain access to useful foreign production.