China’s Hidden Trade Restrictions Threaten India’s Ambitious $32 Billion Smartphone Export Dream

The India Cellular and Electronics Association (ICEA) has warned that unnotified trade restrictions imposed by China are disrupting supply chains and jeopardising India’s target of exporting $32 billion worth of smartphones in FY26. These measures, which impact capital goods, raw materials, and skilled personnel, could reverse India’s manufacturing gains and undermine its emerging role as a global electronics hub.

India’s electronics industry has raised serious concerns over China’s informal trade restrictions, which it claims are quietly undermining the country’s smartphone export ambitions. In a letter to the government, the India Cellular and Electronics Association (ICEA) said these curbs pose a significant threat to India’s export target of $32 billion for FY26, up from $24.1 billion the previous year.
The ICEA , whose members include Apple, Google, Motorola, Foxconn, Tata Electronics, Vivo, Oppo, Lava, Dixon, and Flex, said China has been deploying unofficial and sequential curbs on the export of capital equipment, rare minerals, and skilled Chinese personnel, all of which are critical to smartphone production in India.
“While domestic production remains relatively insulated for now, export-linked manufacturing to the tune of $24 billion in FY25, projected to cross $32 billion in FY26 in smartphones, has now come under serious risk,” ICEA said in its letter.

A Strategic Squeeze on India’s Electronics Surge

According to ICEA, these trade restrictions are being imposed without any formal notification. Instead, verbal directives are being used to delay or deny critical exports to India, including:

High-end capital equipment for electronics assembly

Rare earth materials, vital for semiconductor and smartphone manufacturing

Technical experts who support technology transfers and new product development

These restrictions, the industry body warns, are not coincidental but deliberate and targeted — timed to offset India’s growing strength as an alternative to China in electronics manufacturing, particularly in light of Apple’s shift in production.

Since the launch of the Production Linked Incentive (PLI) scheme in 2020, India has emerged as a critical export base for smartphone majors. Apple, for example, now manufactures nearly 20 per cent of global iPhones in India via Foxconn and Tata Electronics, a significant increase from five years ago when all production was China-based. The US market is increasingly being served directly from India.

China Tightens the Screws Further

In recent months, Beijing has gone further by instructing:

Chinese-origin engineers and professionals working at Indian and multinational facilities to return to China mid-assignment

Chinese companies to gradually exit Indian operations, restricting both personnel and technology transfers

This has affected hundreds of trained personnel and is stalling everything from product development to scale-up operations, ICEA said. “This is already disrupting not only technical operations but also technology transfer, scaling of production, and new product development—core to India’s ambitions of becoming a global electronics hub,” the association warned.

Cost Escalations and Supply Chain Disruption

The ICEA highlighted that locally producing the impacted capital goods or sourcing them from Japan or South Korea would cost three to four times more than importing from China, placing severe financial strain on Indian manufacturers. The scarcity of alternative rare earth sources further complicates matters, rendering supply chains unstable and undermining India’s competitiveness.

India’s smartphone production has grown rapidly from $26 billion in FY19 to $64 billion in FY25, driven in part by favourable policy support. Smartphones have risen from 167th place to the top position in India’s export basket over the past decade. But ICEA now warns that these gains could be rolled back if China’s tactics go unchecked.

The Road Ahead: Building Local Capability

India recently announced new incentives to boost domestic production of electronics components and sub-assemblies, with the goal of building a $145–155 billion ecosystem by 2030. But until that goal is realised, India remains heavily dependent on Chinese imports for key inputs.

The ICEA has urged the Indian government to:

Establish bilateral and multilateral dialogues to counter Chinese restrictions