Apr 24.2023

Souring China-India relations could shape the IoT landscape in 2023

Souring China-India relations could shape the IoT landscape in 2023

Border tensions have escalated between India and China, increasing trade restrictions and decreasing investment. Read to see how they could impact IoT in 2023.

Over the years, the Chinese government has pushed for a more significant presence in India by establishing technology parks, investment, and joint ventures with Indian companies. With these initiatives, China hopes to expand its influence in India and capitalize on the growing demand for consumer electronics products in the local market.

However, recent border tensions between the two countries have hindered this progress. China's aggressive foreign policy in the South China Sea and Indian Prime Minister Narendra Modi's firm stance on national security have led both countries to take a more aggressive approach toward one another. As a result, trade restrictions have been imposed, investment has decreased, and joint ventures have become more challenging to establish.

Given the current political climate between the two countries, it is likely that China and India will remain at odds in 2023. This unfortunate state of affairs could profoundly impact how the Internet of Things and related technologies evolve in both countries over the next few years.

This post will discuss how souring China-India relations could shape the IoT landscape in 2023. But first, let's assess the nations' historical interactions.

How have China and India interacted in the past?

The Republic of India and the People's Republic of China have had a shaky relationship since establishing diplomatic relations in 1950. The countries have clashed several times due to several unresolved issues, especially regarding the long-standing sovereignty dispute over Aksai Chin and Arunachal Pradesh, two states on opposite ends of India's northeastern border.

In the 1960s, tensions reached a fever pitch, and a border war erupted, which resulted in India's defeat. Soon after, both countries took measures to improve their relationship by signing peace agreements and establishing joint economic projects. While several aggressive standoffs between the two countries continued, bilateral trade and investment steadily increased over the next five decades.

Today, China and India have a virtually symbiotic relationship. China is India's largest trading partner, and India has been the fastest-growing recipient of Chinese Foreign Direct Investment (FDI) since 2000. At the same time, the Indian government has been particularly welcoming to Chinese telecom and digital companies, allowing them to penetrate the local market.

However, tensions between the two nations have reemerged over the last two years, primarily triggered by the 2021 confrontations along the Ladakh border that resulted in several casualties. Consequently, anti-Chinese sentiment has been brewing within India, with the government issuing a ban on more than 200 Chinese mobile apps and blocking some Chinese investments.

China's most recent move has been releasing "new standardized names" for 2 locations in the contentious Aksai Chin and Arunachal Pradesh regions, much to India's dismay. All signs point to a continued hostile relationship between the two countries for the foreseeable future.

How will souring China-India relations impact IoT in 2023?

The China-India relationship is essential in determining the direction of the rapidly growing Internet of Things landscape. After all, thanks to their enormous combined population, the two countries are the world's biggest producers and consumers of connected IoT devices.

Here are four facets of the IoT sector that could be severely impacted by a hostile China-India relationship.

1. Manufacturing

China is a significant global manufacturing hub for consumer electronics products, including smartphones and other connected devices. While India has made commendable strides toward closing the gap with China regarding semiconductor production and other advanced technologies, Chinese investments still play a critical role in India's IoT ecosystem.

However, China's dominance in India's IoT market could dwindle if tensions continue. As the Indian home-grown tech industry grows, Indian companies will likely become more inclined to manufacture their products or look for alternative sources of production rather than depend on China. This shift in sourcing will likely cause fluctuations in the cost and availability of some IoT solutions across the international market.

2. Innovation

The IoT sector heavily relies on innovation for its growth and development. China and India are both renowned for their innovative capabilities in the tech world, and a collaborative effort from them could lead to some incredible leaps forward in IoT technology.

Unfortunately, with the tension between them unlikely to resolve entirely, there will likely be a limited collaboration between Chinese and Indian firms when developing new IoT solutions. The result could be a slower rate of innovation and growth in the industry.

3. Trade

Conflict often leads to trade restrictions. India's decision to ban Chinese applications is one such example, and similar bans could be enforced on other exports from China too. On top of this may come higher tariffs and taxes on products imported from China which could severely disrupt the supply chain for components necessary for IoT solutions, ultimately leading to higher pricing and scarcity.

Although some Indian companies are attempting to fill in the supply chain gaps created by the restrictions, it won't be easy for them to match up to the scale and capabilities of Chinese firms, especially now that chips and the resources required to make them are in short supply worldwide.

4. Competition

The international IoT market is already highly competitive. With Chinese and Indian firms competing against each other, concerns have emerged over the quality and IP protection of specific product categories, such as AI-based chip designs and connected devices.

A hostile China-India relationship could further exacerbate the competition between these two countries, making it more difficult for their respective firms to collaborate and benefit from each other's expertise. This could lead to a situation where both sides miss out on opportunities they would have otherwise leveraged, impeding advancements within the IoT industry.

The Future of China-India Relations in the IoT Industry

The deteriorating situation between China and India will have a lasting impact on the IoT industry. Whether in terms of innovation, trade, or competition, the ripple effects could be felt throughout the industry for years.

However, both countries will likely find a way to reach an understanding and stabilize their relationship. This eventuality could open up new avenues for collaboration, enabling further innovation and growth in IoT.

While it is still being determined how China-India relations will shape up in 2023 and beyond, IoT's future heavily relies on diplomatic efforts. Geopolitical forces have the power to shape markets, and it is only through collective efforts that lasting progress can be made.

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