India's import restrctions on computers and servers signal more measures to come globally

Jingyue Hsiao, DIGITIMES Asia, Taipei 0

Credit: AFP

Amid increasing regionalization and rising protectionism, major economies worldwide are more than willing to impose export and import restriction measures on electronics and technological goods in the guise of security, with India being the latest example.

The Directorate General of Foreign Trade of India announced Notifications 23 and 26 of 2023, saying that the import restriction shall be imposed on PC products under the HSN code 8471, with the effective date deferred from August 3 to November 1, potentially not to disrupt the upcoming festive season that falls in October and early November and to provide transition time for notebook and tablet vendors to cope with.

Rajeev Chandrasekhar, Minister of State for Electronics and Information Technology of India, tweeted that the move was to ensure trusted hardware and systems, reduce import dependence and increase domestic manufacturing of PC products.

India is not alone in implementing import and export controls on electronic products based on security issues, be it national security or cybersecurity. It is to be noted that following the revelation of the PRISM program under the US National Security Agency, China was determined to cultivate local server suppliers, such as Inspur. The US's concerns over Huawei and ZTE also led to the decision to prevent telecom operators from procuring their equipment. After the US and its allies in Asia and Europe imposed export restrictions to slow down China's semiconductor development, China countered back with license requirements for exported germanium and gallium. India also imposed restrictive measures to stop trade and investments with China, including safeguard duty on solar cell and module imports, with Chinese exporters most affected.

According to WTO's report on G20 Trade and Investment Measures released on July 4, 2023, trade worth a total of US$88 billion was affected by trade-restrictive measures imposed by G20 members. Furthermore, the stockpile of G20 import restrictions remained significant, with over 11% of G20 imports affected by import restrictions implemented by G20 economies since 2009 and which are still in force, adding that no sign of any meaningful rollback of existing measures was observed.

One of the goals forr India's newly-announced import restrictive measures on PCs, servers, notebooks, and tablets may aim to slow down imports from China, which accounted for more than half of India's imports of PC products in fiscal 2023 (April 2022 to March 2023). Besides computers and servers, India's Directorate General of Foreign Trade also announced a ban on imported drones in February 2022 to stop imports from China and encourage a local manufacturing ecosystem. Still, until China's recent announcement of license requirements for exported dual-use drones in early August, India has been among the primary export markets for China's drones.

India's latest restrictive measure is likely to benefit EMS/ODMs with established facilities in place, especially Dixon, Optiemus, Lava, and Bhagwati, with more investments to come when as many as 44 IT hardware manufacturers had registered for manufacturing computers in India, reports The Economic Times, citing an unnamed official. However, it will not be easy for India to build a notebook and server manufacturing ecosystem as massive as mobile phone production in the short term.

However, as the global supply chain for electronics, especially products with national security and cybersecurity concerns, is moving toward fragmentation and regionalization, where intra-regional trade increasingly outweigh inter-regional trade, more trade-restrictive measures are expected to come, especially when multilateral organizations like the WTO have quite limited influence in deterring non-tariff barriers.