A decade ago, Chinese stock markets had crashed beyond repair, the real estate market had burst its bubble and innards, the manufacturing monopoly had holes all over. Still China has bounced back with extensive research ethos and successfully penetration of high intellectual property assets domains.
When Apple CEO Tim Cook dismissed the idea that China’s manufacturing dominance rests on cheap labour, he punctured one of the most persistent myths of globalisation. “China stopped being the low labour-cost country years ago,” Cook said, adding that anyone still operating under that assumption was looking at the wrong China—or perhaps at a China that no longer exists. Apple, he clarified, does not manufacture in China because wages are low, but because skills are concentrated there at a scale and depth unmatched anywhere else in the world. Superb culture.
Cook’s most telling comparison was not about wages or subsidies, but about people. In the United States, he said, a meeting of tooling engineers might struggle to fill a room. In China, the same meeting could fill multiple football fields. This was not rhetorical flourish. It was a precise diagnosis of what China has spent three decades building: a dense, interlinked ecosystem of vocational skill, advanced tooling, materials science, applied engineering, and manufacturing execution that turns ideas into physical products with speed and precision.
This “quantity of skill” in one place—combined with the “type of skill”—is the true foundation of China’s industrial power. It explains why global dependence on China today is not a hangover from a low-cost past, but a consequence of a high-capability present.
From the world’s factory to the world’s workshop
China’s transformation from a low-cost manufacturing base into a sophisticated industrial hub has been neither accidental nor purely market-driven. It has been the result of long-term strategic planning, heavy state investment, and a deliberate alignment between universities, research institutions, and industry. Over time, this created what might be called “innovation valleys,” where research does not languish in journals but moves rapidly into tooling, prototypes, and production lines.
Today, global industries depend on China not just for finished goods, but for intermediate inputs that are far harder to substitute. Electronics, electric vehicles, artificial intelligence hardware, renewable energy systems, batteries, advanced machinery, pharmaceuticals, and green technologies all rely on Chinese manufacturing and research in ways that are often invisible to consumers but painfully obvious to supply-chain managers.
China dominates global production in electronics and machinery, leads in electric vehicles and battery manufacturing, and has become indispensable in renewable energy components such as solar PV modules and wind turbine parts. In artificial intelligence, while software leadership remains contested, China’s hardware capabilities—especially in materials, sensors, and manufacturing scale—anchor much of the physical AI economy.
Even where China does not dominate outright, it occupies critical choke points.
The strategic choke points: Materials, medicines, and machines
One of the most consequential areas of dependence lies in critical materials. China controls near-monopolies in rare earth metals, which are essential for smartphones, defence systems, electric motors, and green energy technologies. These materials are not rare in a geological sense, but China’s dominance in processing and refining them gives it disproportionate leverage over global supply chains.
In pharmaceuticals, the dependence is equally stark. A significant share of the world’s active pharmaceutical ingredients (APIs) and intermediate drugs originates in China. This is not merely a developing-country phenomenon. Advanced healthcare systems across the world rely on Chinese chemical intermediates to keep medicine affordable and available. Disruptions—whether from pandemics, trade restrictions, or geopolitical tension—expose how fragile this dependence can be.
Manufacturing inputs such as specialty chemicals, basic metals, industrial components, and sub-assemblies further extend China’s reach into other nations’ industrial bases. Even when final assembly happens elsewhere, the upstream components often trace their origins back to Chinese factories.
Semiconductors: Power without control
Semiconductors offer a useful corrective to exaggerated claims about China’s technological omnipotence. China produces only a small share—roughly 5 to 15 percent—of the world’s microchips, and these are largely based on older manufacturing nodes. Yet China consumes over half of global semiconductor output and leads in patent filings related to chip design and materials.
Crucially, China remains dependent on foreign imports for advanced manufacturing equipment and leading-edge chips. This vulnerability has shaped Beijing’s push for self-sufficiency, with ambitious targets for domestic production by the middle of this decade. But the gap between aspiration and capability remains significant, constrained by export controls, equipment monopolies, and the sheer complexity of cutting-edge semiconductor fabrication.
This paradox—being indispensable to global manufacturing while remaining dependent in certain frontier technologies—defines China’s current position in the global tech order.
India’s refrigerators, microwaves; component dependence
India’s experience with refrigeration compressors illustrates how dependency operates in practice. China is the largest supplier of refrigeration and air-conditioning compressors to India, but it is incorrect to claim that every refrigerator in India runs on a Chinese compressor. The truth is more nuanced—and more revealing.
India imports compressors primarily from China, South Korea, and Germany, with China dominating in volume. Many major brands source compressors or sub-components from Chinese suppliers, and at one point some manufacturers were sourcing nearly everything from China. However, exceptions exist. Companies like LG use proprietary in-house inverter compressors, while some brands source from Brazil or domestic Indian manufacturers.
Yet even with these exceptions, the overall picture remains clear: Chinese suppliers dominate. Efforts to localise production are underway—companies like Lloyd (Havells) have increased domestic component sourcing—but progress is uneven. In early 2025, when Chinese manufacturers diverted shipments to the US, India experienced shortages, underscoring how fragile its supply chains remain.
The conclusion is uncomfortable but unavoidable. A vast majority of refrigerators in India likely depend on Chinese-made compressors or components, even if not every single unit does.
Make in India: Ambition meets structural reality
When Prime Minister Narendra Modi launched the Make in India initiative in 2014, the ambition was transformative. Manufacturing was to rise from 15 percent of GDP to 25 percent by 2025, powered by streamlined regulations, targeted industrial policy, and a renewed emphasis on domestic production.
In Modi’s second term, this ambition took concrete shape in the Production Linked Incentive (PLI) scheme, covering 14 key sectors. The PLI programme had a dual objective: increase manufacturing’s share of GDP and reduce dependence on China in strategically important sectors.
A decade later, the results are mixed at best. Electronics exports have grown, but manufacturing’s share of GDP has fallen to under 14 percent—lower than when Make in India was announced. Dependence on China has not disappeared; it has merely migrated upstream, from finished goods to components, materials, and expertise.
PLI: Partial wins and structural losses
With an outlay of ₹1.9 trillion, the PLI scheme has delivered visible successes in certain sectors. Semiconductor and defence manufacturing plants have emerged in Gujarat and Assam through partnerships with American and Taiwanese firms. Telecommunications has achieved around 60 percent import substitution in critical components. Solar PV imports from China have fallen dramatically in a short period. And Apple now produces roughly 20 percent of its iPhones in India—a development unthinkable a decade ago.
These are not trivial achievements. They demonstrate that India can attract global manufacturers and integrate into high-value supply chains when incentives, scale, and geopolitics align.
But the limitations are equally striking. API imports from China have declined only marginally. EV battery manufacturing remains slow, with key technologies still licensed from Chinese firms. Specialty steel, textiles, and auto components have failed to meet targets. The common thread among the successes is that they largely occupy the downstream end of value chains—assembly, final integration, and packaging.
The upstream—materials, tooling, advanced components, and industrial know-how—remains stubbornly out of reach.
Apple in India: Assembly without ecosystem
Apple’s supply chain offers the clearest illustration of India’s challenge. In China, Apple’s ecosystem spans universities, research labs, materials suppliers, tooling firms, logistics networks, and manufacturing giants, all operating in tight coordination. This ecosystem took two decades to build, with active state support.
In India, Apple has recreated only a fraction of this system, focused mainly on downstream assembly. India’s long emphasis on software and services has produced a workforce adept at coding and IT, but ill-prepared for large-scale manufacturing, precision assembly, and industrial problem-solving. As a result, even as iPhones are assembled in India, Chinese expertise remains embedded in processes, tooling, and management.
The result is a form of dependence that is less visible but no less real.
Opening the door to Chinese capital—again
With the PLI scheme facing possible termination, New Delhi has opted for a pragmatic pivot rather than ideological retreat. The new approach retains industrial policy but opens the door wider to Chinese investment, particularly through joint ventures and strategic partnerships.
In March 2025, India accelerated talks with global electronics suppliers—many of them Chinese. Dixon, one of India’s contract manufacturing success stories, has already formed a joint venture with China’s HKC Co. Ltd. to produce semiconductor display modules. Visa issuance has increased. Large investment proposals, including BYD’s plan for a manufacturing plant in Telangana, are back on the table. Even SHEIN has found a way back into the Indian market through licensing arrangements with Reliance.
This re-engagement does not signal naivety. It reflects a recognition that decoupling is neither feasible nor desirable for a country still building its industrial base.
Multi-alignment or multi-dependence?
India’s strategic challenge lies in avoiding a slide from multi-alignment to multi-dependence. Today, India risks depending on China for upstream manufacturing inputs, the US for advanced technologies, and sanctioned nations like Russia for energy and defence. This is not strategic autonomy; it is strategic vulnerability disguised as balance.
The root cause is domestic. Government inefficiency, regulatory uncertainty, weak supply-side reform, and underinvestment in vocational training continue to constrain Indian manufacturing. Until these structural issues are addressed, indigenisation will remain aspirational rather than achievable.
Cranes, concrete, and the quiet Chinese presence
Even India’s infrastructure boom reveals the quiet pervasiveness of Chinese industrial power. Zoomlion, a Chinese heavy machinery manufacturer, dominates the crane rental market across India. From 25-ton hydraulic cranes to 500-ton crawler cranes, Zoomlion equipment is ubiquitous on Indian construction sites.
Indian firms rent, service, and resell these machines through a network of providers and authorised dealers. The machinery enables India’s growth, but the technology, design, and manufacturing remain Chinese. This is not a problem to be moralised away; it is a reality to be understood and managed.
A pragmatic path forward
In the short term, India would benefit from deepening economic linkages with both the US and China without framing the relationship as a zero-sum contest. India can position itself as an alternative manufacturing base for Western markets while simultaneously attracting Chinese investment in non-sensitive sectors.
Modi has often said that India missed the first three industrial revolutions but intends to lead in the fourth. Achieving that goal will require ideological agnosticism, vocational depth, institutional reform, and a willingness to learn from uncomfortable truths—chief among them that manufacturing excellence cannot be willed into existence by slogans alone.
China’s lesson is not about cheap labour. It is about patience, scale, skill, and ecosystem-building. Until India internalises that lesson, it will remain integrated into global supply chains—but on terms set by others.
