Xiaomi Flags Supplier Hesitancy Over India's Chinese Firm Scrutiny

According to a letter and a source with direct knowledge of the situation, China's Xiaomi has informed New Delhi that smartphone component suppliers are hesitant to set up operations in India due to the government's intense surveillance of Chinese enterprises.

Xiaomi Says India's Scrutiny Of Chinese Firms Concerns Suppliers

Xiaomi, which has the largest share of India's smartphone market (18%), also requests in the letter dated Feb. 6 that India consider granting manufacturing incentives and cutting import taxes on certain smartphone components, as per US News.

The Chinese company assembles cellphones in India, using largely local components and the remainder imported from China and elsewhere. The letter is Xiaomi's response to a question from India's information technology ministry about how New Delhi might boost the country's component manufacturing sector.

India increased its inspection of Chinese enterprises following a 2020 border conflict between the two nations that killed at least 20 Indian soldiers and four Chinese soldiers, affecting major Chinese companies' investment plans and eliciting repeated protests from Beijing.

While Chinese firms operating in India are hesitant to speak out about the scrutiny, Xiaomi's letter demonstrates that they continue to suffer in India, particularly in the smartphone industry, where many crucial components are sourced from Chinese vendors.

Muralikrishnan B., the president of Xiaomi India, wrote the letter, saying India should focus on "confidence-building" measures to persuade component suppliers to set up shop locally.

"There are concerns among component suppliers about establishing operations in India, stemming from the challenges faced by Indian companies, particularly those of Chinese origin," Muralikrishnan added, without mentioning any specific companies.

The letter stated that the concerns were connected to compliance and visa difficulties, which it did not elaborate on, among other things. According to the report, "the government should address these concerns and work to instill confidence among foreign component suppliers, encouraging them to set up manufacturing facilities in India.

Xiaomi and the IT ministry did not respond to requests for additional information or comments.

Xiaomi and Vivo Face Regulatory Challenges in India Amid Broader Chinese App Bans

Last year, Indian officials accused Chinese smartphone maker Vivo Communication Technology of violating visa regulations and allegedly siphoning $13 billion from India. India has also blocked more than $600 million in Xiaomi assets, alleging unlawful transactions to foreign companies disguised as royalty payments.

Both Chinese corporations have denied any wrongdoing. Aside from regulatory scrutiny of Xiaomi and Vivo, India has banned over 300 Chinese apps since 2020, including ByteDance's TikTok, and blocked planned investments by Chinese manufacturers BYD and Great Wall Motor.

According to the source, many executives from Chinese electronics businesses struggle to obtain visas to enter India, and their companies continue to endure slow investment clearances as a result of New Delhi's strict inspection.

In the letter, Xiaomi's Muralikrishnan also argued for further decreasing India's import duties following New Delhi's Jan. 31 decision to slash import taxes on battery covers and phone camera lenses. According to the letter, Xiaomi is also requesting that India lower import taxes on sub-components used in batteries, USB cords, and phone covers.

Xiaomi stated in the letter that reducing import duties might "increase India's manufacturing competitiveness... in terms of costs. " However, convincing component manufacturers to set up shop in India would necessitate more generous incentives.

In January, India's senior industrial policy bureaucrat, Rajesh Kumar Singh, hinted that if the two nations' borders continue quiet, India may relax its strict monitoring of Chinese investments.

Photo: BoliviaInteligente/Unsplash