Suppliers to Chinese smartphone makers are worried about India’s scrutiny, reveals Xiaomi

In correspondence shared with the government of India, China’s leading smartphone manufacturer Xiaomi reveals concerns expressed by smartphone component suppliers regarding setting up operations in India amidst increased government scrutiny of Chinese companies. The communication, dated February 6th, advocates for incentives and tariff reductions to facilitate local manufacturing, as per a Reuters report. With an 18 per cent market share, Xiaomi is a significant player in India’s smartphone market. In the letter, it appeals to Indian authorities to consider offering manufacturing incentives and reducing import tariffs on specific smartphone components. Xiaomi currently assembles smartphones in India using a combination of local and imported components, predominantly from China. The letter, in response to an inquiry from India’s information technology ministry, underscores the need for bolstering the country’s component manufacturing sector. It comes against the backdrop of heightened scrutiny of Chinese businesses in India following a 2020 border clash. Muralikrishnan B., President of Xiaomi India, emphasizes the necessity for confidence-building measures to attract component suppliers to establish local operations. The concerns cited in the letter pertain to compliance, visa issues, and other unspecified factors. While neither Xiaomi nor the IT ministry provided further comment, the letter indicates ongoing challenges faced by Chinese companies in India, particularly in the smartphone sector, which heavily relies on Chinese suppliers for critical components. Xiaomi advocates for a reduction in import tariffs on sub-components such as batteries, USB cables, and phone covers to enhance India’s manufacturing competitiveness. However, it suggests that significant incentives are necessary to persuade component manufacturers to set up facilities in India. The plea from Xiaomi aligns with recent signals from Indian officials suggesting a potential easing of scrutiny on Chinese investments, contingent on peaceful border relations between the two countries. However, challenges remain, including visa issuance and investment clearances, which continue to impede Chinese companies’ operations in India. The letter from Xiaomi underscores the complexities of the India-China relationship, with economic factors intertwined with geopolitical tensions. As both countries navigate these complexities, the future of Chinese investments and operations in India remains uncertain, contingent on diplomatic developments and regulatory decisions. (With inputs from agencies)