Xiaomi Says India's High Scrutiny Of Chinese Firms Makes Suppliers Reluctant: Report

Xiaomi's communication reportedly includes requests for manufacturing incentives and reduced import tariffs on specific smartphone components.

Xiaomi, the Beijing-headquartered smartphone maker, has conveyed concerns to New Delhi regarding the reluctance of smartphone component suppliers to establish operations in the country amidst increased scrutiny of Chinese firms by the government. As reported by Reuters based on inputs from a source familiar with the matter, Xiaomi's communication, dated February 6, also includes requests for manufacturing incentives and reduced import tariffs on specific smartphone components.

Xiaomi, holding the largest market share in India at 18 per cent, underscores its reliance on local assembly with a blend of domestic and imported components. The letter responds to India's information technology ministry's inquiry into advancing the country's component manufacturing sector.

Elevated scrutiny of Chinese entities following a deadly border clash in 2020 has impacted investment plans and operations of Chinese companies in India, with Xiaomi's letter shedding light on persisting challenges, particularly in the smartphone domain where crucial components originate from Chinese suppliers.

Muralikrishnan B., President of Xiaomi India, emphasises the need for confidence-building measures to encourage local operations by component suppliers. The letter cites concerns over compliance, visa issues, and other undisclosed factors, urging the government to address these apprehensions and foster confidence among foreign suppliers to establish manufacturing units in India.

Vivo, Xiaomi Came Under Scanner

Notably, Indian authorities previously accused Chinese smartphone company Vivo Communication Technology of visa breaches and alleged fund siphoning, while freezing over $600 million in Xiaomi assets for purported illegal remittances.

Apart from regulatory hurdles faced by Xiaomi and Vivo, India has also banned over 300 Chinese apps since 2020 and halted planned projects by Chinese automakers BYD and Great Wall Motor.

Executives of Chinese electronics firms reportedly encounter difficulties in obtaining Indian visas, with slow investment clearances attributed to New Delhi's rigorous scrutiny.

Xiaomi advocates for reduced import tariffs on sub-components like batteries, USB cables, and phone covers to bolster India's manufacturing competitiveness. This plea comes in the wake of India's recent move to lower import taxes on battery covers and phone camera lenses.

In January, India hinted at easing its scrutiny of Chinese investments contingent upon peaceful border relations between the two countries, as indicated by Rajesh Kumar Singh, India's top industrial policy bureaucrat.