Xiaomi says government investigation of Chinese companies hurts smartphone suppliers

China’s Xiaomi has told New Delhi that smartphone component suppliers are wary of setting up operations in India amid heavy scrutiny of Chinese companies by the government, according to a letter and a source with direct knowledge of the matter.

Xiaomi, which has the largest share of India’s smartphone market at 18 percent, in the letter dated February 6 also asked that India consider offering manufacturing incentives and reducing import duties for some smartphone components.

The Chinese company assembles smartphones in India with mostly local components and imports the rest from China and elsewhere. The letter is Xiaomi’s response to India’s Ministry of Information Technology’s query on how New Delhi can further develop the country’s component manufacturing sector.

India stepped up scrutiny of Chinese businesses after at least 20 Indian soldiers and four Chinese soldiers were killed in border clashes between the two countries in 2020, disrupting investment plans of big Chinese companies and drawing repeated protests from Beijing. be performed.

While Chinese companies operating in India have been reluctant to speak publicly about the investigation, Xiaomi’s letter shows that they continue to struggle in India, especially in the smartphone sector where many critical components come from Chinese suppliers. .

In the letter, Xiaomi India President Muralikrishnan B said India needs to work on “confidence building” measures to encourage component suppliers to set up operations locally.

“There are apprehensions among component suppliers about setting up operations in India, which has arisen due to the challenges faced by companies in India, especially those of Chinese origin,” Muralikrishnan said without naming any company.

The letter said the concerns were related to compliance and visa issues, which it did not elaborate on, and other factors. “The government should address these concerns and work to build confidence among foreign component suppliers, encouraging them to set up manufacturing facilities in India,” it said.

Xiaomi and the IT ministry did not respond to queries seeking further details and comment.

Indian authorities last year accused Chinese smartphone company Vivo Communication Technology of violating certain visa rules and alleged that it embezzled $13 billion (about Rs 1,07,895 crore) from India.

India has also frozen Xiaomi’s assets worth over $600 million (roughly Rs. 4,979 crore) for alleged illegal remittances to foreign entities as royalty payments.

Both Chinese companies deny any wrongdoing.

Apart from the regulatory probe into companies like Xiaomi and Vivo, India has also banned over 300 Chinese apps since 2020, including ByteDance’s TikTok, and halted planned projects by Chinese automakers BYD and Great Wall Motor.

The source said many executives of Chinese electronics companies are struggling to get visas to enter India, and their companies are facing slow approvals for investment due to heavy scrutiny by New Delhi .

In the letter, Xiaomi’s Muralikrishnan also made a case for further reducing India’s import duties, coming on the heels of New Delhi’s January 31 move to reduce import taxes on battery covers and phone camera lenses.

According to the letter, Xiaomi is also asking India to reduce import duties on sub-components used in batteries, USB cables and phone covers.

Reducing import duties could “enhance India’s manufacturing competitiveness in terms of costs”, Xiaomi said in the letter, but would require larger incentives for component makers to set up shop in India.

In January, India’s top industrial policy bureaucrat Rajesh Kumar Singh indicated that India might ease its increased scrutiny of Chinese investments if the two countries’ border remained peaceful.

© Thomson Reuters 2024

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