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.