China’s export ban on engineers and equipment disrupts manufacturing overseas

BENGALURU/SINGAPORE – Since January, Apple supplier Foxconn’s factories in India have been waiting for technicians and machinery from China that have still not arrived.

The delay is due to what sources tell The Straits Times are new export controls on crucial equipment and manpower, in what appears to be a bid by China to keep investment and manufacturing jobs within its borders.

This comes as tariffs loom under

newly inaugurated US President Donald Trump’s administration,

which would make China-made products more expensive and less competitive.

China’s export controls have thrown a spanner in the Taiwanese company’s immediate plans to expand the production of Apple iPhones, laptops and AirPods in India until it can develop alternatives. 

A senior official in the Indian government confirmed that three private sector companies have reported delays in imports of capital equipment from China. He spoke on condition of anonymity because the discussions are private.

The official told ST that India’s ministries of electronics and external affairs are aware of the blockade, but were “gathering more information” about whether it was targeted particularly at India. 

He declined to name the companies affected.

Manufacturing sources in India, China and Taiwan told ST that the impact on Foxconn, the world’s largest iPhone manufacturer and a bellwether of American companies diversifying from China, is significant, but it was not the only company impacted by China’s export blockade.

Bloomberg reported disruptions in imports of technical equipment for the Indian unit of Chinese automaker BYD and Waaree Energies, India’s largest solar-panel maker, but ST could not independently verify this.

China, bracing itself for Mr Trump’s tariffs on US$500 billion (S$676 billion) worth of Chinese goods that the US imports, is trying to scuttle attempts by American companies like Apple to diversify manufacturing outside the Asian manufacturing giant. 

Amid the slowest growth rates in decades in 2024, analysts say China has been trying to retain foreign manufacturers to protect its export earnings and offset a worrying property slump, falling household spending, high local government debt and youth unemployment.

But Beijing’s export controls might instead end up pushing inconvenienced companies to find suppliers in other countries, sources told ST. 

The blockade began without any official announcement from China, leaving companies scrambling to investigate the reason for delays and Customs hold-ups of equipment exports from there. Companies are also planning workarounds to prevent falling behind on production targets.

Exit bans on Chinese technicians began in December, while equipment from China has been blocked since January.

Lack of crucial machinery affects Foxconn’s production 

Apple makes around 85 per cent of its iPhones in China, but has been expanding its production in India since 2017 to tap the latter’s smartphone demand and low labour costs that are a third of China’s. The American company now makes iPhone models 12, 13, 14, 15 and 16 in India, and exported iPhones worth a record 1.08 trillion rupees (S$16.9 billion) from there in 2024. This comprises about 14 per cent of the global total – that is, one in seven iPhones worldwide. 

Foxconn’s Sriperumbudur plant in south India accounts for the lion’s share of iPhones made in India, followed by Taiwan’s Pegatron and India’s Tata Electronics. Over 70 per cent of the India iPhone output is exported, primarily to the US. 

All three contract manufacturers in India are affected by China’s equipment blockade to different degrees based on the size of their operations, said a former supply manager for Apple in India. But as the largest producer of iPhones outside China, Foxconn’s Sriperumbudur factory in south India is the most visibly impacted. 

“Foxconn is like a seaside villa first to be hit by a tsunami, but the smaller villas in the second line might be affected later,” the former supply manager told ST, requesting anonymity as they were not authorised to speak to the media.

A Taiwanese trade official said Foxconn India imports specialised equipment from China such as voltage and heat testing machines, precision metal works, motorised tracks in assembly lines, as well as circuit boards and tool-making machines. 

“There is 70 per cent to 80 per cent reliance on machinery produced in China. Not all of the equipment is blocked, but enough crucial machinery is stopped to stall production,” the trade official noted. 

The former supply manager told ST that since the start of 2025, there have been unprecedented delays in the arrival of equipment categorised under international import-export codes HS 84 and 90. 

HS Code 84 applies to 87 types of machines including nuclear reactors, boilers, forklifts, mechanical appliances, machines to make semiconductor wafers, and integrated circuits. HS Code 90 includes 33 types of optical, photographic, measuring, checking, and precision instruments and their parts. 

Despite diversifying its supply chain since Covid-19 disruptions, Apple remains dependent on China for components such as batteries, magnets and high-precision tools, making a complete production shift out of the country unlikely in the near term. 

This dependency means that even minor shipment delays could disrupt production elsewhere.

A source familiar with Apple’s operations confirmed that China’s move is already affecting Vietnam, Indonesia, Thailand, Malaysia and Mexico, too, where Apple and other American companies are expanding supply chains. 

Hard to secure alternatives swiftly

Although Foxconn and its suppliers had managed to move some equipment out of China in 2024 before the exit ban, it is hard to operate them in isolation, a Foxconn contractor operating in China and India told ST. 

For example, one of Foxconn’s suppliers managed to move to India one of the six factory lines for making the iPhone screen. But that alone is insufficient because all six lines need to run at the same time to produce the volume of screens necessary for the next set of production processes to be efficient. 

In November 2024, Apple through Foxconn began early manufacturing of its upcoming iPhone 17 in India, a notable shift from its usual practice of handling this key phase in China. This stage turns prototype designs into blueprints ready for mass production. 

When asked if the production of iPhone 17 would now be stalled, the Foxconn contractor said Foxconn could pull it off if it spent more time and money “to replicate the production lines and training new hires” outside China.  

Apple and Foxconn did not respond to ST’s queries.  

Sending Taiwanese and Vietnamese workers to China for training

About 1,000 “lu gan”, or mainland-hired managers – as opposed to “tai gan”, or Taiwan-hired managers – will have to return to China from India when their work visas expire in March. They include engineers responsible for designing the new factories and planning the production lines. 

Their replacements will not be able to leave for India because of the exit ban, according to the Foxconn contractor.

He said Foxconn is now going on a massive hiring drive in Taiwan for managers, but it will take time before they get trained to be as competent as the experienced mainland managers.

He expected more Taiwanese and Vietnamese workers to be sent to Foxconn’s factory in Shenzhen, China, for training. 

The trade official in India told ST that in the past year, Foxconn India has also been trying to hire directly from Indian engineering schools, and training locally recruited line managers.

The manufacturer has been planning for local recruitment since India-China relations worsened following military clashes in 2020. At the time, the Indian government blocked visas for Chinese engineers, somewhat easing the rule only in 2024 following persistent corporate requests. China’s current exit bans make replacements even more urgent.

China adds US companies to export control list 

This phase of machine and material blockades began after the Chinese government published an Export Control List on dual-use machinery and minerals in October 2024, and later on Jan 2, 2025, issued a watch list of 28 American companies of strategic importance making defence, aviation and related equipment. 

However, the ban’s implementation has also been applied more broadly to categories and companies not mentioned in the official lists. 

Mr Pranay Kotasthane, who heads Indian think-tank Takshashila Institution’s high-tech geopolitics programme, inferred that Chinese officials are blocking equipment beyond this list to be safe, especially after the Jan 2 notification. 

China at risk of losing advantage it holds

Experts told ST that China’s export restrictions will cause short-term trouble, but will end up incentivising companies to further move their production ecosystem elsewhere. 

Mr Kotasthane called it “an own goal for China”. 

“A lot of companies chose contract manufacturers in China because it’s cheaper, there is policy consistency and the ability to export to the world. Once export controls are in place, and companies can’t export seamlessly, they will shift to other countries,” he said. 

He gave the example of German manufacturer Herrenknecht, which faced bottlenecks at Chinese Customs in 2024 to export its tunnel-boring machines assembled there that are used in Indian metro rail projects.

It has since assembled more in its factory in Chennai, India. 

Foxconn is also expanding its supplier base in India, Vietnam and Thailand.

“For the first time in years, Foxconn is participating in trade shows in India to network with potential local suppliers”, like the upcoming Source India summit of electronics suppliers in Chennai in February, said the Taiwanese trade official. 

On Jan 24, Indian conglomerate Tata Electronics announced it had bought a majority stake in Pegatron, marking the gradual indigenisation of Apple’s manufacturing in India.

The economic benefits of having Apple contract manufacturers in any city are immense, as shown by the experience of the city of Zhengzhou in China’s southern Henan province.

The Foxconn manufacturing hub there hired over 300,000 workers at peak production, according to research by Associate Professor Chen Xiaofei from Henan University.

The army of companies that serve as contractors to Foxconn also provided tens of thousands of jobs for Chinese workers.

Foxconn’s landing in Zhengzhou in 2010 turned the backwater city into one of the top exporting cities in central China.

At its latest peak in 2019, the combined value of imports and exports generated by Foxconn in Zhengzhou was 28.6 per cent of the city’s gross domestic product. 

Zhengzhou stands to lose both the trade and the jobs should Foxconn pull out.

“The local government has told Foxconn that as long as you are willing to stay in Zhengzhou, anything can be discussed,” said a source who is privy to the discussions between Foxconn and the Zhengzhou government. 

“But I don’t think Foxconn will want to stay. This episode has made clear to a private enterprise like Foxconn that what by right belongs to you – equipment and people – is not yours to use, but can end up being beholden to the Communist Party or to the country China,” he added. 

With the double whammy of pressure from Apple to move more of its production out of China and China’s new export controls, the exit of Foxconn, its suppliers and other companies from China might be inevitable. 

Mr Kotasthane said: “China’s attempts to use export restrictions will only force further diversification, and thus diminish whatever leverage it holds.”