Xiaomi flags scrutiny: Xiaomi has communicated to the government that suppliers of smartphone components are hesitant to establish operations in India due to increased scrutiny of Chinese companies, according to Reuters sources.
Manufacturing incentives proposal
The letter, dated February 6th, also includes a request for the government to consider providing manufacturing incentives and lowering import tariffs for specific smartphone components. Xiaomi, holding the largest market share in India’s smartphone market at 18 per cent, assembles smartphones in India using mostly local components along with some imported from China and elsewhere. This communication from Xiaomi comes as a response to an enquiry from the information technology ministry regarding the development of the country’s component manufacturing sector.
The heightened scrutiny of Chinese businesses in India follows a border clash in 2020, which led to disruptions in investment plans and drew protests from Beijing. Despite reluctance amongst Chinese companies to openly discuss these issues, Xiaomi’s letter underscores ongoing challenges faced by such firms in India, particularly in the smartphone sector where critical components are often sourced from Chinese suppliers.
Boosting local manufacturing
Xiaomi India President Muralikrishnan B highlighted the need for “confidence-building” measures to encourage component suppliers to establish local operations. Concerns cited in the letter include compliance issues, visa challenges, and unspecified other factors. The letter urges the government to address these concerns and bolster confidence amongst foreign component suppliers to promote local manufacturing.
While Xiaomi and the IT ministry declined to provide further details or comments, previous allegations against Chinese companies by Indian authorities, such as Vivo Communication Technology, for breaching visa rules and alleged fund syphoning, have contributed to the current atmosphere of scrutiny.
Regulatory crackdown impact
In addition to regulatory scrutiny, the government has taken measures such as banning over 300 Chinese apps and halting planned projects by Chinese automakers. The source mentioned that executives of Chinese electronics companies often face difficulties obtaining visas for India, and their companies encounter delays in investment clearances due to increased scrutiny.
Xiaomi’s letter also advocates further reduction of India’s import tariffs, following recent moves by the government to lower taxes on specific components. The company suggests that reduced import tariffs could enhance India’s manufacturing competitiveness in terms of costs, but emphasises that attracting component manufacturers to set up operations in India would require more substantial incentives.
In January, a senior Indian bureaucrat hinted at a potential easing of scrutiny on Chinese investments if the border situation between the two countries remains peaceful.
(With Reuters Inputs)
