By Li Panpan

Although Chinese smartphone brands dominate the Indian market with four ranking in the top five positions by shipments recently, they should be prepared to cope with more geopolitical changes and complex law enforcement by the local governments, said a recent JW Insights report. 

With years of effort, China’s mobile phone brands have opened up the Indian market, with Xiaomi, OPPO, and Vivo taking up huge market shares. Data from the leading global technology market analyst firm Canalys shows that Xiaomi continued to rank first in smartphone shipments in India in the second quarter of 2022, followed by Samsung, Realme, Vivo, and OPPO, four of which are Chinese brands in the top five. 

What’s more, driven by the growth of those brands, several Chinese parts and assembly factories have invested in India, improving the local supply chain support, and driving the local industry growth. 

However, in the past two months, three major brands, Xiaomi, OPPO, and Vivo, have been inspected by Indian law enforcement agencies.

One of the most direct reasons for them to encounter this is local policies and regulations changes.

Just after the JW Insights report was published last week, Reuter reported on August 3 that the Indian tax authorities DRI issued a statement accusing Vivo of evading RNR22.1 billion($278 million), and Vivo protested this charge, claiming to have abided by the Indian laws. Xiaomi and Oppo also faced similar charges this year. 

Meanwhile, 20,000 Chinese companies have successively received notifications from the local Indian ROC (registration department) to submit all company information and documents,” Wan Jun, head of Jilian Enterprise Service, focusing on overseas investment consulting. 

“India’s latest policy released in May requires security check by the Ministry of Home Affairs (MHA) of all Chinese nationals who are directors of a company in India, the Indian government is scaling back investment from China,” added Wan. 

A component manufacturer investing in India said, “With current geopolitical changes around the world, some officials in the Indian government have formed a greater prejudice against Chinese-funded enterprises, which caused difficulties for them to operate in.”

Chinese smartphone brands’ misfortune in India also triggers thoughts about the “Made in India” strategy. 

In 2014, Modi proposed the “Made in India” strategy aiming to rapidly promote the development of local manufacturing by introducing foreign-funded enterprises on a large scale. However, it has not gone as expected after several years. 

Data released by the United Nations Conference on Trade and Development shows that 60% of imports from China in India’s key manufacturing industry are semi-finished and capital goods widely used to manufacture finished products. Generally, electronic products are imported from China.

It may be necessary for the local government to curb the development and growth of Chinese brands in India while creating more opportunities for local enterprises.

Wan Jun disagrees, saying that Chinese brands provide many job opportunities to the local area, and India can’t bypass Chinese companies to become the next global center of digital manufacturing, so a series of recent actions against Chinese enterprises are likely to be changed in the future.

In the long run, the Indian smartphone market still has great potential. With a significant market space, user volume, and the penetration rate of smartphones being less than 50%, the rapid development of ecommerce will boost greater demand for smartphones. A Chinese smartphone manufacturer with years of efforts in the Indian market said, “India will remain the key strategic market for global smartphone brands for at least the next ten years.”

However, due to the complex and changeable external environment, the manufacturing cost advantage in India could gradually disappear.

Almost all of the best-selling mobile phones in India focus on the selling point of cost-effectiveness. Therefore, it is difficult for those brands to increase the overall unit price of their products.

They can expand the scale of products such as automobiles and IoT as much as possible to reduce the dependence on the smartphone business.

Although expanding product scale and developing emerging markets cannot be achieved overnight, Chinese smartphone brands in India should think ahead and make early preparations, considering changes in international relations, government attitudes, and market conditions, concluded the JW Insights report.