Xiaomi, a leading Chinese smartphone company holding a significant 18% market share in India, has expressed apprehension concerning the reluctance of smartphone component suppliers to establish operations in India. This hesitancy arises amidst heightened scrutiny of Chinese companies by the Indian government. The concerns were conveyed through a formal letter and have been substantiated by a reliable source familiar with the matter.
Dated February 6, the letter from Xiaomi communicates the reluctance of suppliers to establish operations in India and urges the Indian government to consider providing incentives for manufacturing and reducing import tariffs for specific smartphone components. While Xiaomi assembles smartphones in India using predominantly local components, it does import the remaining components from China and other countries.
Addressed to the information technology ministry of India, Xiaomi’s letter was in response to an inquiry regarding the development of the country’s component manufacturing sector. The increased scrutiny of Chinese businesses in India is a direct outcome of the border conflict between India and China in 2020, resulting in the disruption of investment plans of numerous Chinese companies and drawing repeated protests from Beijing.
Muralikrishnan B., President of Xiaomi India, articulated in the letter the necessity for “confidence building” measures to incentivize component suppliers to establish operations in India. The concerns raised by Xiaomi pertain to compliance, visa issues, and other pertinent factors. Apprehensions among component suppliers stem from the challenges encountered by companies in India, particularly those of Chinese origin.
Xiaomi’s letter also advocates for further reduction in India’s import tariffs to enhance the country’s manufacturing competitiveness in terms of costs. Specifically, it highlights the import tariffs on sub-components used in batteries, USB cables, and phone covers. While Xiaomi believes that lowering import tariffs could improve India’s manufacturing competitiveness, it underscores the need for substantial incentives to attract component manufacturers to establish operations in the country.
It is worth noting that both Xiaomi and the Indian IT ministry abstained from responding to inquiries seeking additional information and comments. Furthermore, Indian authorities previously accused Chinese smartphone company Vivo Communication Technology of violating visa rules and illicitly transferring funds from India. Similarly, over $600 million in Xiaomi’s assets were frozen owing to alleged unauthorized remittances to foreign entities.
Ultimately, Xiaomi’s concerns regarding the hesitancy of Indian suppliers and its calls for manufacturing incentives and lower import tariffs for smartphone components underscore the challenges faced by Chinese companies in India. The efforts of the company to address these challenges and the responses from Indian authorities will play a pivotal role in shaping the future landscape of Chinese investments and operations in the country.
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