Chinese Companies Prefer Outsourcing to Indian Partners Amid Souring Bilateral Relations
Chinese companies are reportedly opting for outsourcing to Indian partners instead of direct investment as bilateral relations between the two nations continue to deteriorate. This move comes as Chinese entities and nationals face increased scrutiny in India, leading to a significant decline in Chinese investments in the South Asian country.
In a bid to circumvent these challenges, BBK Group, the parent company of popular Chinese smartphone brands Vivo, Oppo, Realme, and OnePlus, has begun outsourcing mobile phone manufacturing to Indian EMS (Electronics Manufacturing Services) providers. Notable Indian companies that have secured manufacturing deals with BBK Group include Dixon Technologies and Karbonn Group.
Sources reveal that Karbonn Group, with a monthly production capacity of one million phones, handles manufacturing for Vivo and Realme. On the other hand, Dixon Technologies has a lower initial capacity but has recently secured mobile phone manufacturing orders from two global companies. Atul Lall, the managing director of Dixon, disclosed that production for one of the customers will commence within the next couple of months, with the other customer’s production scheduled for February or March. Lall further affirmed that Dixon expects substantial volumes from these new customers.
Dixon plans to initiate trial production for one of the customers in February or March, with commercial production expected to kick off in April. Moreover, one of the brands is among the top three or four in India, while the other is a large global brand that requires specialized production lines, hence the four to five-month timeline for commercial production.
The decision by Chinese companies to outsource manufacturing to Indian partners comes as they face legal and tax complications in India. However, the Indian government has expressed concerns about the lack of benefits for Indian industries due to Chinese dominance in the smartphone market. Instead of collaborating with Indian partners for manufacturing and distribution operations, Chinese smartphone vendors operating in India have been partnering with their Chinese counterparts. The BBK Group, for instance, either manufactures phones sold in India in its own facilities or outsources to Chinese Original Design Manufacturers (ODMs) such as Wingtech or DBG Technology. This potential outsourcing move by BBK Group would mark the first time it outsources mobile phone manufacturing to Indian partners.
According to the Ministry of Commerce of China, outward Foreign Direct Investment (FDI) to India witnessed a decline in 2022, highlighting the strained bilateral relationship between the two countries. As the conflict between China and India continues, Chinese companies are becoming increasingly cautious about expanding their investments in India. Meanwhile, the Indian government seeks to ensure that local industries benefit from the smartphone market’s growth instead of being overshadowed by Chinese players.
Analyst comment
Neutral news.
As bilateral relations between China and India worsen, Chinese companies are opting for outsourcing mobile phone manufacturing to Indian partners. BBK Group, the parent company of popular Chinese smartphone brands such as Vivo and Oppo, has started outsourcing to Indian EMS providers. This move is aimed at circumventing legal and tax complications in India. However, concerns have been raised about the lack of benefits for Indian industries due to Chinese dominance in the smartphone market. Outsourcing to Indian partners marks a significant shift for Chinese companies and reflects their growing caution in expanding investments in India.
