According to a Reuters report yesterday, a letter and sources with direct knowledge of the situation revealed that Xiaomi Corp has told New Delhi that smartphone parts suppliers are wary of setting up operations in India due to strict scrutiny of Chinese companies in the country.
Xiaomi, which has the largest share of the Indian smartphone market (18 percent), asked India in the February 6 letter to consider offering manufacturing incentives and reducing import duties on certain smartphone components.
Xiaomi assembles its smartphones in India using mostly local components, with the rest imported from China and elsewhere. The letter was Xiaomi’s response to an inquiry from India’s Information Technology ministry, which had asked the company “how New Delhi can further develop component manufacturing in India.”
Muralikrishnan B., president of Xiaomi India, said in the letter that India needed to take “trust building” measures to encourage component suppliers to do business there.
“Component suppliers are concerned about setting up operations in India because of the challenges faced by Indian companies, especially the Indian subsidiaries of Chinese companies,” Muralikrishnan said. He did not name any of the companies.
The concerns were related to compliance and visa issues, among other factors, the letter said, without elaborating. “India should address these concerns and work to instill confidence in foreign component suppliers and encourage them to set up manufacturing plants in India,” the report said.
Xiaomi and India’s Information Technology ministry did not respond to requests for more information and comment.
Indian authorities last year accused Chinese smartphone company vivo of violating some visa rules and accused IT of embezzling $13 billion from India.
India has also frozen more than $600 million of Xiaomi’s assets, saying it is suspected of illegally sending money to foreign entities through disguised royalty payments.
Both Chinese companies have denied any wrongdoing.
In addition to regulatory scrutiny of companies such as Xiaomi and vivo, India has banned more than 300 Chinese apps since 2020, including ByteDance’s TikTok, and halted planned projects, such as those planned by Chinese automakers BYD and Great Wall Motors.
Many executives of Chinese electronics companies are struggling to get visas to enter India and their companies continue to face slow investment approvals due to tight scrutiny in New Delhi, the sources said.
In the letter, Xiaomi’s Muralikrishnan also made the case for further lowering Indian import duties, following New Delhi’s move on January 31 to reduce import duties on battery covers and mobile phone lenses.
Xiaomi also asked India to reduce import duties on sub-components such as batteries, USB cables and phone cases, the letter said.
Xiaomi said in the letter that lowering import duties could “increase the competitiveness of Indian manufacturing… On the cost side “, but greater incentives are needed to get component manufacturers to set up factories in India.