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HomeBusinessXiaomi says suppliers worried about India's heavy scrutiny of Chinese companies

Xiaomi says suppliers worried about India’s heavy scrutiny of Chinese companies

Chinese company Xiaomi has told New Delhi that smartphone component suppliers are cautious about setting up operations in India amid intense scrutiny of Chinese companies by the government, according to a letter and a source. with direct knowledge of the matter.

Xiaomi India (REUTERS)

Xiaomi, which has the largest share in India’s smartphone market at 18%, also asks in the letter dated February 6 that India consider offering manufacturing incentives and reducing import tariffs for certain smartphone components. .

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

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India stepped up scrutiny of Chinese companies after a border clash between the two countries in 2020 killed at least 20 Indian and four Chinese soldiers, disrupting investment plans by large Chinese companies and prompting repeated protests from Beijing. .

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

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

“There are fears among component suppliers about setting up operations in India, due to the challenges faced by companies in India, particularly those of Chinese origin,” Muralikrishnan said, without naming any companies.

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

Xiaomi and the IT Ministry did not respond to queries for further information and comments.

Last year, Indian authorities accused Chinese smartphone company Vivo Communication Technology of violating some visa rules and alleged that it diverted $13 billion in funds from India.

India has also frozen more than $600 million in Xiaomi assets for alleged illegal remittances to foreign entities by passing them off as royalty payments.

Both Chinese companies deny wrongdoing.

In addition to regulatory scrutiny of companies like Xiaomi and Vivo, since 2020 India has also banned more than 300 Chinese apps, including ByteDance’s TikTok, and halted planned projects such as those by Chinese automakers BYD and Great Wall Motor.

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The source said many executives at Chinese electronics companies are struggling to get visas to enter India, and their companies continue to face slow clearances for investments due to intense scrutiny from New Delhi.

In the letter, Xiaomi’s Muralikrishnan also defended the need to further reduce India’s import tariffs, coming on the heels of New Delhi’s Jan. 31 move to reduce import duties on battery covers and lenses. phone cameras.

Xiaomi is also asking India to reduce import tariffs on subcomponents used in batteries, USB cables and phone cases, according to the letter.

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Reducing import tariffs could “increase India’s manufacturing competitiveness… in terms of costs,” Xiaomi said in the letter, but getting component makers to set up shop in India would require greater incentives.

In January, India’s top industrial policy bureaucrat, Rajesh Kumar Singh, noted that India could ease its heightened scrutiny of Chinese investments if the border between the two countries remains peaceful.

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