India's electronics sector sits on a contradiction currently. Under the Atmanirbhar Bharat and Make in India programmes, the country is pushing hard to localise manufacturing and reduce dependence on imports. At the same time, its fast-growing electronics industry still relies on mature production technology, integrated supply chains and cost-competitive components from China.

Neither side can easily walk away from the other. India offers a consumer market of more than 1.4 billion people and rising demand. China offers manufacturing depth, component capability and supplier ecosystems that India cannot replicate in the near term. This tension, rather than any single policy, is shaping how the two industries work together.

The form of that cooperation has already changed. The earlier model, in which Chinese firms set up wholly owned factories and exported complete production lines, is giving way to joint ventures, technology licensing and lighter-asset arrangements. Many Chinese companies now accept minority or shared equity positions, partnering with Indian investors and earning returns through licensing fees, management services and dividends.

The Haier transaction illustrates the trend. In March 2026, Haier completed a sell-down of its Indian appliances business so that Haier and a consortium of Warburg Pincus and Bharti Enterprises each hold 49 percent, with the balance in an employee scheme. TCL has been reported to be exploring a similar shared-ownership structure for its display plant in Andhra Pradesh, seeking to bring in one strategic and one financial Indian partner while retaining a minority stake, though that transaction remains at the negotiation stage.

These are not isolated moves. They reflect a wider pattern in which Chinese electronics groups keep operational and technological involvement in India while ceding formal control, allowing them to stay in a growing market without triggering the full weight of Indian investment restrictions.

On the Indian side, the regulatory position is more open than it was, but only in a qualified way. Press Note 3 of 2020 requires government approval for all investment from countries sharing a land border with India, which includes China.

In March 2026 the Government recalibrated this position, formalised through Press Note 2 of 2026 and the amended FEMA Non-Debt Instruments Rules notified on 2 May 2026. Investment carrying indirect land-border ownership below 10 percent, with no control, may now use the automatic route. For specified manufacturing sectors, including electronic components, electronic capital goods, polysilicon and ingot wafers, approvals are to be decided within 60 days, and this fast-track extends to holdings of up to 49 percent, provided majority ownership and control of the Indian company stay with resident Indians.

Direct investment by Chinese entities, however, still requires prior government approval regardless of size, and the approval requirement for Pakistan and Bangladesh remains fully in force. Indian majority control is the operative condition throughout, and Production Linked Incentive benefits continue to depend on meeting localisation and value-addition thresholds.

The Chinese-side framework has moved in a different direction. Two State Council instruments, Decree 834 on industrial and supply chain security and Decree 835 on countering improper foreign extraterritorial jurisdiction, took effect in spring 2026. Decree 834 subjects supply chain information gathering within China, such as audits, questionnaires and on-site inspections, to closer scrutiny under existing Chinese laws. Decree 835 asserts jurisdiction over conduct outside China where there is an appropriate connection, and allows foreign entities that implement or promote foreign extraterritorial measures to be designated and penalised. Enforcement is primarily administrative, including prohibition orders, exclusion from government procurement, data and exit restrictions, and fines, with potential exposure for individual executives.

The first action under Decree 835 concerned an EU regulatory investigation, not any India-related measure. It shows that the framework is intended mainly as a defensive and reciprocal response to foreign measures viewed as discriminatory or improperly extraterritorial. As a result, Chinese suppliers involved in India-related projects must pay closer attention to fully understand the regulatory requirements in both China and India.

The Apple supply chain is the clearest illustration of how diversification actually works in practice, and why it is not the same as decoupling. Apple has expanded iPhone assembly in India rapidly through Foxconn and Tata Electronics. India now accounts for roughly a quarter of global iPhone output, and Apple aims to source most United States-bound iPhones from India.

Tata Electronics, which entered the business only after acquiring Wistron's Indian operations in late 2023, has scaled quickly and, over the five-year PLI period to FY26, narrowly overtook Foxconn in the value of iPhones exported from India. Assembling a unit in India costs a fraction of what it would in the United States, which is why Apple airlifted around two billion dollars of iPhones from India in a single month in early 2025 ahead of a tariff change.

Yet the deeper point is that this expansion has not severed Apple's reliance on China. China still assembles the majority of the world's iPhones and remains the anchor of Apple's supplier ecosystem, skilled workforce and advanced tooling. What is emerging instead is a more interdependent picture. Apple's Indian vendors, including Tata Electronics and Foxconn, have begun exporting components such as printed circuit boards and phone housings back to China, reversing the traditional one-way flow in which China supplied parts for Indian assembly.

Apple's strategy is therefore best read as geographic diversification layered on top of a continuing Chinese base, a China Plus One approach rather than a China exit. It shows that the links between China's manufacturing ecosystem and India's growing electronics industry are being reconfigured, not broken.

Looking ahead, three trajectories appear plausible. The first is regulated coexistence, where approvals stay controlled, joint ventures and licensing dominate, and cooperation continues steadily. The second is selective liberalisation, where India eases restrictions further in priority manufacturing sectors as industrial demand grows, building on the 2026 amendments. The third is sustained friction, where geopolitical considerations narrow the space for collaboration.

For businesses on both sides, the practical reality is that the two legal regimes now pull in opposite directions, and transactions have to be structured with both in view. India increasingly welcomes the capital, technology and supply chain integration that Chinese investment can bring, but on terms that preserve Indian control. China, meanwhile, is tightening the conditions under which its firms and technology can move offshore. The links between the two industries are likely to persist, shaped by the regulatory choices of both governments rather than replaced by them.