India Approves New Huawei Manufacturing Center, Marks First Chinese Telecom Deal Approved Over Security Concerns

On July 15, 2015, the Indian Home Ministry approved a proposal from China‘s Huawei Technologies for the establishment of an electronics and telecommunications device-manufacturing factory at India‘s SIPCOT Special Economic Zone in Sriperumbudur.  The facility would include the manufacture of hardware and the provision of support services, including for trading and logistics functions.  Until now, security agencies had stonewalled FDI proposals from Chinese telecommunications firms, citing espionage risks.

Unlike Huawei‘s existing factory in Tamil Nadu, where production is entirely exported, the new factory will be allowed to market its products domestically.  As a result of significant distrust by India‘s security agencies of Chinese telecommunications firms, the Indian Home Ministry issued a requirement that all critical positions at the factory be filled by Indian nationals.  The approval, the first of its kind granted to a Chinese telecom firm in recent years, marks a notable shift in India‘s view of Chinese foreign direct investment (FDI) into its economy, especially in this critical sector.