Army Design Bureau bans use of Chinese parts in Indian military components

New Delhi, July 4, 2025 — In a significant move aimed at bolstering national security and promoting self-reliance in defence manufacturing, the Indian Army Design Bureau (ADB) has officially prohibited the use of Chinese-origin components in military-grade hardware and systems developed for the Indian Armed Forces. The directive, issued earlier this week, impacts vendors, private defence manufacturers, and DRDO-linked organizations supplying technology and equipment to the military.

Strategic Move to Safeguard Defence Infrastructure

The ADB’s directive follows heightened concerns over cybersecurity threats, intellectual property vulnerabilities, and supply chain dependencies on geopolitical adversaries. With India engaged in a prolonged border standoff with China in the Ladakh region and facing frequent cyber intrusions allegedly traced back to Chinese IPs, the military’s design and procurement bodies are doubling down on risk mitigation.

“National defence systems cannot afford to have potential Trojan horses embedded within critical systems,” said a senior official from the Ministry of Defence (MoD) under condition of anonymity. “This move is part of a broader effort to harden our technological backbone against sabotage and cyber-espionage.”

The ban applies across all categories of electronic components, sensors, sub-systems, and raw materials sourced from Chinese entities or manufactured within China—even if integrated via third-party suppliers.

Implications for Domestic Defence Industry

The directive is expected to pose short-term challenges for India’s growing defence manufacturing sector, particularly small and medium enterprises (SMEs) that had previously relied on cost-effective Chinese imports.

“Chinese components—especially semiconductors, printed circuit boards (PCBs), and RF modules—have been an affordable mainstay in many legacy systems,” explained Pranav Malhotra, a defence procurement analyst at Avishkaar Research. “But the shift to domestic or non-Chinese alternatives will ultimately enhance system integrity and reduce strategic risk.”

To support vendors in complying with the new policy, the ADB is reportedly working in coordination with the Defence Public Sector Undertakings (DPSUs), DRDO, and private OEMs to map reliable alternate sources, including South Korea, Taiwan, Israel, and domestic electronics suppliers.

Alignment with “Aatmanirbhar Bharat” Vision

The directive is in sync with Prime Minister Narendra Modi’s “Aatmanirbhar Bharat” initiative, which emphasizes indigenization and self-reliance in critical sectors, particularly defence. Over the past few years, the Indian government has steadily increased restrictions on Chinese investments, apps, telecom hardware, and infrastructure contracts, following the Galwan Valley clash in 2020.

In 2022, the Ministry of Defence released a “Positive Indigenization List” banning the import of over 400 defence items, encouraging domestic R&D and innovation. The latest decision by the ADB adds to this trend, aiming to insulate India’s military assets from foreign interference.

“This is not just about procurement but about building strategic autonomy,” said Lt. Gen. (Retd.) Dr. Arvind Mehta, defence expert and former head of Army Technology Command. “If our radars, missiles, or surveillance systems have Chinese parts, we are handing the adversary a backdoor.”

Market and Industry Response

Shares of Indian electronics and defence component manufacturers surged following the news. Companies such as Bharat Electronics Ltd (BEL), Data Patterns, and Astra Microwave Products saw intra-day gains of 3-7% amid anticipation of increased orders.

“There will be a ramp-up in demand for homegrown microelectronics, rugged computing systems, and secure communications components,” noted Rashi Khurana, defence sector analyst at Anand Rathi. “Companies that can provide credible alternatives to Chinese chips will benefit significantly.”

Meanwhile, Indian semiconductor startups such as Saankhya Labs and Signalchip are being closely watched by investors, as their niche technologies may now see faster adoption by defence integrators.

Challenges and Way Forward

While the move is strategically sound, it brings logistical and R&D hurdles in the short term. Indian suppliers still lag in certain high-tech domains like AI processors, gallium arsenide chips, and advanced radar modules, where Chinese manufacturers have traditionally dominated the low-cost segment.

The ADB has indicated that exceptions may be granted in rare cases where no viable alternative exists, but such exemptions would require rigorous vetting and security audits.

The Ministry of Defence is also reportedly considering a new fund to support R&D and capacity expansion among Indian component manufacturers, with potential incentives for joint ventures and technology transfers.

Investor Outlook

The policy shift offers a clear opportunity for investors looking at India’s defence and electronics ecosystem. Experts predict a significant reallocation of contracts in favour of Indian and allied-country firms over the next 3–5 years.

“Policy momentum is clearly in favour of Indian players, and this will drive long-term value creation,” said Sanjay Vyas, Portfolio Manager at Ascent Capital. “Investors should look at mid-cap firms with niche expertise in defence electronics and secure communications.”

However, he cautioned that execution risks remain. “Companies will need to scale production and adhere to military-grade quality benchmarks. Those who fail to adapt will lose out.”

The Army Design Bureau’s ban on Chinese components is more than a procurement guideline—it’s a strategic pivot aimed at shielding India’s military assets from future vulnerabilities while catalyzing domestic innovation. While it may present short-term operational challenges, the long-term trajectory underscores a secure, self-reliant, and technologically advanced Indian defence sector.