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Lava Phone Industry is looking forward to the electronics manufacturing project with China’s Huaqin

Lava International Ltd. Indian smartphones are in advanced talks with Chinese firm Huaqin Technology to set up an electronics manufacturing project in the South Asian country.

The project aims to win contracts from US and Chinese customers for the research, development, design and manufacture of electronic products, according to a letter from Lava to India’s technology ministry seen by Bloomberg News. According to the letter, the partnership talks are nearing completion.

The agreement will give its subsidiaries leverage as it seeks to take on rivals such as Foxconn Technology Group. The Taiwanese giant, which assembles phones for Apple Inc. It is among the electronics companies that have built production capacity in India to diversify outside of China and benefit from incentives that are part of Prime Minister Narendra Modi’s aspirations to make India a manufacturing hub.

Shanghai-based Huaqin, with more than 33,000 employees and more than $13 billion in sales last year, designs and manufactures smartphones, laptops, tablets and smartwatches for clients including Vivo and Xiaomi Corp. and Samsung Electronics Co. and Lenovo Group Ltd. and Amazon.com Inc. and Acer Inc. The partnership with Lava will give Huaqin deeper access to one of the world’s fastest growing major electronics markets that has an abundance of labor that is cheaper than that in China. For Lava, the agreement will bring much-needed capital and expertise as the company strives to become a massive player in the electronics space.

Lava said in the letter that the project will employ more than 100,000 people and “put India on the global map for design, supply chain and manufacturing”. “It would help bring the much-needed supply chain ecosystem, skills and technology to India.”

Representatives for Lava, Huaqin and India’s technology ministry did not respond to emails seeking comment.

The partnership agreement is not finalized as details such as shares are finalized, said people familiar with the matter, who asked not to be named because the plan is not public. People said that while the project will be closely scrutinized by the Indian government, it is likely to get approval because it will raise the country’s status as an electronics manufacturing hub and not threaten national security.

Bloody skirmishes between India and China over the disputed Himalayan border in 2020 led to a frosty relationship between the two nuclear neighbours. New Delhi has subjected Chinese companies operating in the country, such as Xiaomi and rivals Oppo and Vivo, to close scrutiny of their finances, leading to tax demands and allegations of money laundering.

The government has also used unofficial means to ban Huawei Technologies Co. and ZTE Corp. Although there is no official policy banning Chinese networking equipment, wireless carriers are encouraged to purchase alternatives. India is also seeking to restrict Chinese smartphone makers from selling devices cheaper than 12,000 rupees ($146) to kick-start its ailing domestic industry, people familiar with the matter said.

The Lava-Huaqin project will have an advantage over other Chinese manufacturers by being associated with a local producer.

– With help from Gao Yuan.