Xiaomi Says India's Scrutiny of Chinese Firms Unnerves Suppliers
Xiaomi reveals India's scrutiny of Chinese firms unnerves suppliers, citing challenges amid geopolitical tensions and evolving market dynamics in technology.
China's Xiaomi has conveyed to New Delhi that suppliers of smartphone components are hesitant to establish operations in India due to heightened scrutiny of Chinese companies by the government. The letter, dated Feb. 6, from Xiaomi, which holds the largest share (18%) in India's smartphone market, emphasizes concerns and requests manufacturing incentives and reduced import tariffs for specific smartphone components. Xiaomi assembles smartphones in India using mostly local components and some imported from China. The letter responds to an inquiry from India's information technology ministry about developing the country's component manufacturing sector.
India increased scrutiny of Chinese businesses after a 2020 border clash, impacting investment plans and drawing protests from Beijing. Xiaomi's letter sheds light on the struggles Chinese companies face in India, particularly in the smartphone sector where crucial components are sourced from China.
Xiaomi India President Muralikrishnan B. emphasized the need for "confidence building" measures to encourage local operations by component suppliers. The letter expressed concerns related to compliance, visa issues, and other factors. It called for the government to address these concerns, instilling confidence among foreign component suppliers to establish manufacturing facilities in India.
The letter also made a case for lowering India's import tariffs, following the Jan. 31 reduction in taxes on battery covers and phone camera lenses. Xiaomi specifically requested a reduction in tariffs on sub-components for batteries, USB cables, and phone covers. Xiaomi argued that this reduction could enhance India's manufacturing competitiveness in terms of costs but acknowledged that attracting component manufacturers to India would require substantial incentives.
The letter comes amid regulatory scrutiny, with India accusing Chinese smartphone company Vivo of breaching visa rules and siphoning funds from India. India has also frozen over $600 million in Xiaomi assets for alleged illegal remittances. Xiaomi's request for reduced import tariffs aligns with ongoing efforts to ease scrutiny of Chinese investments if the border situation remains peaceful. The challenges faced by Chinese electronics companies include visa difficulties for executives and slow investment clearances due to New Delhi's scrutiny.