Xiaomi Urges India to Address Concerns of Smartphone Component Suppliers
Chinese smartphone giant Xiaomi has raised concerns about the reluctance of smartphone component suppliers to set up operations in India due to intense scrutiny of Chinese companies by the Indian government. In a letter to the Indian government’s information technology ministry, Xiaomi called for manufacturing incentives and lower import tariffs to encourage local production of certain smartphone components. This comes as Xiaomi faces increased challenges in India, where the company leads the smartphone market with an 18% share.
In the letter, Xiaomi’s President for India, Muralikrishnan B., emphasized the need for “confidence building” measures to alleviate the concerns of component suppliers regarding setting up operations in India. The concerns are primarily related to compliance and visa issues, according to Xiaomi. The Chinese company is urging the Indian government to address these concerns and instill confidence among foreign component suppliers to invest in manufacturing facilities in India. However, both Xiaomi and the Indian IT ministry have not responded to requests for further information or comment.
Chinese Companies Struggle in India’s Smartphone Space
Amidst the ongoing scrutiny of Chinese companies in India, Xiaomi’s letter highlights the challenges faced by Chinese companies operating in the smartphone space. Many critical components used in smartphones are sourced from Chinese suppliers, and the scrutiny has made it difficult for these companies to operate smoothly in India. While Chinese companies are hesitant to publicly discuss the situation, Xiaomi’s letter sheds light on the continuing struggle they face. The letter also underscores the need for confidence-building measures and incentives to encourage component suppliers to establish local operations in India.
Regulatory Scrutiny and Bans Disrupt Chinese Business Plans in India
The Indian government has significantly ramped up scrutiny of Chinese businesses following a deadly border clash between India and China in 2020. This clash has impacted the investment plans of major Chinese companies in India and led to repeated protests from Beijing. In addition to regulatory scrutiny, India has banned over 300 Chinese apps, including TikTok, and halted planned projects by Chinese automakers. Chinese electronics companies have also faced challenges in obtaining visas for their executives and securing investment clearances due to the heavy scrutiny by the Indian government.
Xiaomi Calls for Lower Import Tariffs to Boost India’s Manufacturing Competitiveness
Xiaomi’s letter to the Indian government also makes a case for further reducing import tariffs on smartphone components. The company recently welcomed India’s decision to lower import taxes on battery covers and phone camera lenses and is now urging for similar reductions on sub-components used in batteries, USB cables, and phone covers. Xiaomi argues that reducing import tariffs could enhance India’s manufacturing competitiveness by reducing costs. However, the company emphasizes that attracting component manufacturers to set up operations in India would require more significant incentives.
India’s Reevaluation of Chinese Investments Dependent on Border Situation
India’s stance on Chinese investments is closely tied to the border situation between the two countries. Rajesh Kumar Singh, India’s top industrial policy bureaucrat, has indicated that India could ease its heightened scrutiny of Chinese investments if the border remains peaceful. The letter from Xiaomi highlights the interconnectedness of geopolitical tensions and business activities between India and China.
Analyst comment
Positive
As an analyst, the market will likely see a positive impact if the Indian government addresses the concerns raised by Xiaomi. By providing manufacturing incentives and lowering import tariffs, the government can encourage local production of smartphone components, boosting India’s manufacturing competitiveness and attracting more foreign component suppliers. This move can benefit the market by creating more opportunities for investment and growth in India’s smartphone industry.
