No Chinese engineers in Indian iPhone unit: What all China is doing to stop manufacturing switch

As India pushes forward in its bid to become a leading global manufacturing hub, China appears to be deploying a variety of strategic measures to resist the shift in global supply chains, particularly from its own factories to those of its southern neighbour. While the global trend dubbed “China Plus One” encourages diversification away from Chinese manufacturing, recent developments indicate that Beijing is intent on using every lever at its disposal—be it materials, manpower or regulation—to slow India’s rise.

Strategic withdrawal of talent

Perhaps the most visible recent example of Chinese obstructionism is the reported forced withdrawal of more than 300 Chinese engineers from Foxconn’s iPhone manufacturing unit in India. These engineers, previously deployed to help Indian teams ramp up production of Apple’s upcoming iPhone 17, were allegedly recalled due to Beijing’s direct pressure, according to a report by News18 citing top intelligence sources. The move, seen as a disruption aimed at undercutting Apple’s Indian supply chain expansion serves to send a broader message to multinational companies that relocating manufacturing to India may invite covert Chinese retaliation.

Though Apple analyst Ming-Chi Kuo later downplayed the strategic impact of this pullout, emphasising that Taiwanese teams had built most of the critical capacity, it remains symbolically significant. It shows China’s willingness to exert non-market pressure even at the expense of its own nationals working abroad to preserve its manufacturing dominance, a report in The Economic Times said.

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Export restrictions: A new arsenal of economic pressure

China’s control over key raw materials, particularly rare earth elements, has long given it substantial leverage over global industries. This control is now being weaponised to disrupt India’s manufacturing ambitions.

In April 2025, China introduced stricter export licensing requirements for seven rare earth elements, delaying shipments critical to India’s electric vehicle (EV), electronics and defence sectors. Indian Foreign Secretary Vikram Misri raised this issue directly with Chinese Vice Foreign Minister Sun Weidong in Jun,e reflecting the seriousness of the disruption. Despite this diplomatic engagement, dozens of Indian shipments remained stalled at Chinese ports.

This is not an isolated friction. The broader geopolitical undercurrents reveal a strategic intent behind these export denials. Reports indicate that while countries like Japan and South Korea have begun receiving export licenses, India has been selectively denied or subjected to prolonged scrutiny. Some suspect that Beijing’s reluctance stems not only from geopolitical tension but also from India’s growing alignment with the United States and its tightening restrictions on Chinese firms post-2020.

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Magnets and markets: The rare earth crisis

The situation with rare earth magnets highlights the extent of India’s vulnerability. China controls more than 85 per cent of global rare earth processing and over 80 per cent of India’s rare earth magnet imports. These magnets are indispensable in EVs, electronics, wind turbines and defence systems. With shipments stalled since April, Indian automakers warned that EV production might halt by July due to depleted inventories. A delegation of 20 executives from India’s automobile industry even visited Beijing to resolve the issue, backed by India’s commerce ministry.

The government has responded by preparing a Rs 3,500–5,000 crore Production-Linked Incentive (PLI) scheme to support domestic magnet manufacturing. According to The Economic Times, companies like Sona Comstar have already announced plans to start local production, reflecting the urgency of building resilience in critical components.

Agriculture as a battleground

While industrial sectors feel the pinch, Indian agriculture is also under pressure due to China’s complete halt of speciality fertiliser exports. China has been progressively tightening fertiliser exports to India for the past five years, but the latest freeze is the most severe. India imports nearly 80 per cent of its speciality fertilisers, such as water-soluble, micronutrient, and nano fertilisers from China. These products are critical for fruit and vegetable farming and are increasingly replacing traditional fertilisers.

Rajib Chakraborty, president of the Soluble Fertiliser Industry Association, told Financial Express that the complete halt is due to Beijing’s opaque non-inspection policies that effectively block shipments without officially banning them. This has jeopardised India’s crop cycles and food production. Despite increasing demand, domestic production remains infeasible due to low volumes and technological gaps, although companies are now exploring investments in local manufacturing.

Weaponising supply chains

Beyond raw materials and labour, China is also exploiting regulatory choke points to interfere in supply chains. Chinese authorities now demand highly sensitive business information, including production workflows, customer lists, images of factories and product blueprints as part of the export approval process for rare earths and magnets. This, as reported by the Financial Times, has raised alarm among Western and Indian firms about data security and potential commercial espionage.

Executives like Frank Eckard of Magnosphere and Andrea Pratesi of Italy’s B&C Speakers describe how companies must now submit extensive proprietary data to Chinese authorities to receive export permissions. The Chinese commerce ministry’s guidelines for dual-use exports go beyond standard protocols, even asking for visual evidence of the end-user’s application, creating major concerns about intellectual property theft and business confidentiality.

Such data demands highlight how China’s export policies are increasingly tied to its strategic intent to monitor and potentially undermine foreign competitors.

A broader economic strategy against India

Viewed in totality, these measures reflect a broader economic strategy to thwart India’s rise as a manufacturing rival. China has wielded its control over supply chains to impose a series of strategic bottlenecks from export restrictions and fertiliser freezes to labour withdrawals and regulatory roadblocks. As The Economic Times noted, these are not arbitrary actions but part of a low-intensity economic campaign, designed to erode confidence in India as a stable alternative to Chinese manufacturing.

China’s motivations are twofold. First, India’s assertive post-Galwan policies, including bans on Chinese apps, restrictions on foreign direct investment (FDI) and exclusion of Huawei and ZTE from 5G trials have significantly reduced Beijing’s economic leverage. These retaliatory measures may be Beijing’s way of reasserting control. Second, and more fundamentally, China seeks to preempt the global narrative shift from ‘Make in China’ to ‘Make in India’.

India’s response

Yet China’s aggressive stance may be backfiring. While these disruptions have revealed India’s current vulnerabilities, they are also catalysing long-overdue reforms and investments in supply chain independence. The Indian government has launched multiple PLI schemes across 14 sectors, from semiconductors and electronics to EVs and pharmaceuticals, to reduce reliance on China. These initiatives have already made India the second-largest mobile phone manufacturer in the world.

India is also pursuing diplomatic avenues to secure alternative suppliers. Deals with countries like Australia, Vietnam, Kazakhstan and several African nations are underway to diversify sources of rare earths and speciality fertilisers. At the same time, India is negotiating trade agreements with Western powers, such as the United States, the European Union and the United Kingdom to unlock new markets and investment channels.

Efforts are also being made to enhance the domestic talent pool. India is investing heavily in skilling programmes for engineering and technical manpower to substitute for the kind of talent China had previously supplied. The void left by Chinese engineers in operations like Foxconn’s may in fact accelerate India’s push for indigenous expertise.

Pressure as a catalyst for change

While China’s tactics may temporarily slow India’s manufacturing momentum, they also serve to highlight the shifting contours of global economic power. The move to recall engineers, restrict material exports and demand sensitive business data all reveal a deeper insecurity within Beijing about its fading monopoly over global manufacturing. They reflect an awareness that the world’s supply chains are beginning to reorient and that India is becoming central to that realignment.

India’s manufacturing ecosystem remains young, but it is evolving rapidly, shaped by domestic ambition, global trust and strategic necessity. China’s attempt to derail this trajectory may well become the very pressure that forces India to become more resilient, more diversified and ultimately, more independent. If India can handle this critical phase with foresight and resolve, it will not just withstand China’s pressure, it may emerge from it significantly stronger.