Xiaomi Says Phone Component Firms Wary Of Setting Up India Ops

Amid India’s tightened scrutiny of China-based firms, Xiaomi has told New Delhi that smartphone component suppliers are wary about setting up operations in the country.

Xiaomi, according to a Reuters report, has also urged India to consider offering manufacturing incentives and lowering import tariffs for certain smartphone components.

The Chinese company, which has the biggest share in India’s smartphone market at 18%, assembles smartphones in India with mostly local components and the rest imported from China and elsewhere. 

India ramped up scrutiny of Chinese businesses after a 2020 border clash between the two countries killed at least 20 Indian soldiers and four from China, disrupting the investment plans of big Chinese companies and drawing repeated protests from Beijing.

While Chinese companies operating in India are reticent to speak publicly about the scrutiny, Xiaomi, which has written a letter to the Centre, 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 “confidence building” measures to encourage component suppliers to setup operations locally.

“There are apprehensions among component suppliers regarding establishing operations in India, stemming from the challenges faced by companies in India, particularly from Chinese origin,” Muralikrishnan said, without naming any companies.

The mobile firm also raised related to compliance and visa issues that it didn’t elaborate on, and other factors. It 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 continues to knock on the doors of Indian courts against the seizure of INR 5,551 Cr ($676 Mn) from its accounts by Indian authorities for violating FEMA guidelines.

Last month, a division bench of the Karnataka High Court reportedly heard an appeal filed by the smartphone manufacturer against a previous single-judge order that upheld the Enforcement Directorate’s (ED’s) seizure of the funds. 

Meanwhile, Xiaomi is not the only Chinese smartphone manufacturer under the lens of Indian authorities. In July 2022, the ED claimed that Vivo remitted INR 62,476 Cr to foreign parties in the form of royalties to avoid paying taxes in India, a claim the company denied.

OPPO is also under scanner for alleged tax evasion to the tune of INR 4,389 Cr in India.

Note: We at Inc42 take our ethics very seriously. More information about it can be found here.