Dixon’s Partnership with Chinese Firms Likely to Face Govt Heat: Can Press Note 3 Hinder Its Make-in-India Push?

Dixon’s partnership with Chinese firms Chongqing Yuhai and Kunshan Q Technology is likely to face heat from the Indian government’s scrutiny under current regulations. The Indian consumer electronics maker’s recent joint venture with the Chinese components manufacturer will be evaluated by the government under Press Note 3 of 2020, which restricts investments from countries sharing a land border with India, including China. 

“Due process will be followed when their application comes under Press Note 3 rules,” an official source said, according to PTI.

What’s Driving Dixon’s Deal? 

The development comes just days after Dixon announced a joint venture (JV) with Chongqing Yuhai Precision Manufacturing to manufacture precision components. Dixon is reportedly likely to hold a 74% stake in the JV, and the remainder will be held by the Chinese firm. Additionally, the homegrown contract manufacturer signed a binding term sheet to acquire a majority stake in India-based greenfield operations of Kunshan Q Tech Microelectronics for producing camera and fingerprint modules. 

With these newly formed partnerships, Dixon aims to manufacture, distribute and sell camera and fingerprint modules for mobile handsets, internet of things (IoT) systems and automotive applications.

The Noida-headquartered company has also announced its participation in the ₹22,919 crore production-linked incentive (PLI) scheme announced by the government in 2020 to fuel its manufacturing plans. The scheme aims to scale up manufacturing in 14 key sectors, including electrical component manufacturing, mobile and mobile accessories manufacturing, and medical devices. The concerned ministries and departments in the 14 sectors are tasked with the implementation of the scheme. The scheme commenced in 2020-21 and is effective until 2025-26. To avail the benefits under the PLI scheme, the companies must be registered in India and must be involved in the manufacturing of goods in the 14 key sectors. The company must also meet threshold criteria (incremental investment) i.e., a minimum of ₹10 crores for MSME and a maximum of ₹1,000 crores, to be eligible for disbursement of incentive for the year under consideration. The applicant must also have an existing or new manufacturing unit at one or more locations in the country.

Is Press Note 3 Hindering India’s Manufacturing Ambition?

The partnership comes at a time when the Indian government has been pushing for more local manufacturing to power its Atmanirbhar Bharat vision. But the dependence of Indian manufacturing companies' dependence for foreign technology and talent, particularly from countries like China, has led them to demand an easing in the Press Note 3 restrictions that were introduced in 2020 following troubled geopolitical relations between India and China driven by military escalation. 

“An entity of a country, which shares land border with India or where the beneficial owner of an investment into India is situated in or is a citizen of any such country, can invest only under the government route,” the Ministry of Commerce & Industry had said in the note. 

In May this year, a team from the Tata Group-owned air-conditioner manufacturer Voltas visited China to revive discussions with Highly Group for a JV to start a compressor plant in India, the Economic Times earlier reported. The Chinese company rejected the proposal, citing delayed government approvals and geopolitical tensions as a significant risk factor to an equity partnership in India. The Chinese major, however, agreed to a technical partnership. The deal between the two had earlier failed to fructify due to delays in getting government approval. 

Prior to this, another significant partnership that suffered due to the restrictions was JSW MG Motor India’s proposal to get benefits under the PLI scheme, the Times of India had earlier reported. The benefits under the scheme were held back by the government to check if the FDI proposals were in alignment with the press note rules. Besides, the restrictions have held back MG Motors expansion plan in India post 2020. MG Motor Chinese parent SAIC Motor Corp is looking to offer majority stakes to an Indian company over the coming 2-4 years to fuel next phase of growth in the country. Meanwhile, the billionaire Sajjan Jindal-led JSW Group has planned to raise its stake in the JV, ET earlier reported. 

But the demand for easing investment norms hasn’t just come from the Indian industry. Government officials, too, have urged for similar relaxation. At an ASSOCHAM event held in December last year, India’s Chief Economic Advisor (CEA), V Anantha Nageswaran, emphasised greater collaboration with China to integrate it with the country’s supply chain. 

“...One has to first resolve the question of, how do we integrate China into our supply chain, before we think about how to integrate ourselves in the global supply chain,” the CEA had said. 

Former 16th Finance Commission chairman Arvind Panagariya is another key government official who advocated that India should be open to investments from China. 

“If the US is taking investment from China, if Germany is taking, I would (be) open to their investment,” Panagariya earlier said at the CII Global Economic Policy Forum 2024, according to PTI. 

The relaxation in restriction under the Press Note 3 is crucial, especially at a time when the world is turning towards emerging economies like India. The 2025 Economic Survey highlighted that China is a manufacturing powerhouse, signaling its significance for India, which is eyeing walking on a similar path. Another crucial point that the survey highlighted is India’s dependence on China for technical support in key manufacturing industries like automobile, energy and electronics. 

“Leading EV manufacturers have noted an increasing proportion of Chinese imports in their total material expenditures, reflecting a significant dependence on China for certain resources and technical knowhow,” the 2025 survey stated. 

The developments have called for easing of the restrictions if India wants to boost local manufacturing and integrate itself into the global supply chain. But the government, maintaining a cautious stance on investments from China, has not shown any sign of relaxation.