Chinese smartphone giants seek Indian partnerships amid govt push

Vivo, Oppo, and Xiaomi are in discussions to collaborate with Indian companies for manufacturing and distributing their products in India, however, major conglomerates seem hesitant

Several major Chinese smartphone manufacturers Vivo, Oppo, and Xiaomi are in discussions to collaborate with Indian companies for manufacturing and distributing their products in the country, according to a report by Mint. This move follows earlier attempts to establish joint ventures with Indian partners, which did not materialise.

The Indian government has been nudging foreign companies to partner with local firms under its 'Make in India' initiative. However, major Indian conglomerates, who could be potential equity partners, prefer to set up their own manufacturing operations. These operations would be akin to local electronics manufacturing services or large global contract manufacturers, allowing them to produce multiple brands and potentially engage in exports.

 

According to Mint, Chinese firms are in talks with significant Indian groups such as Tata Group, Reliance Industries, and Dixon Technologies. However, these discussions have not progressed significantly due to ongoing tax investigations and legal issues involving Chinese brands. For instance, the Enforcement Directorate (ED) is probing Vivo for suspected money laundering, and the government alleges that Vivo, Oppo, and Xiaomi have evaded taxes, including customs and GST payments, totalling Rs 9,000 crore between FY19 and FY23.

Chinese brands dominate smartphone market

According to Counterpoint Research, Xiaomi, Oppo, Vivo, and Realme collectively held 58 per cent of India’s smartphone market as of March 2024, with Chinese brands accounting for 75 per cent of the market share by May 2024.

However, recent data from International Trade Centre (ITC) revealed that despite being a dominant player in the Indian smartphone market, Chinese phone exports fell by 2.8 per cent in FY24, compared to the previous year, signalling a $3.8 billion drop in revenue year-on-year.

Challenges faced by Chinese tech firms in India

While the Indian government is keen on Chinese-owned companies having Indian equity partners, local leadership, and local distribution networks, there seems to be a reluctance among entities in the country to own brands with Chinese origins. The root of the issue appears to lie in the stigma associated with Chinese firms, products, and services, which stems from historic border tensions between the two nations.

Indian companies prefer manufacturing or distribution partnerships where they can benefit from the sales without taking ownership of the brand. These partnerships could be mutually beneficial as Indian companies would not be seen as part of a ‘Chinese’ brand but would still manufacture devices for them, leveraging their significant market presence in India.

This can be noted in other industries, such as fast fashion, where Reliance Retail has drawn a partnership with Shein, where the latter will receive a licence fee as a share of the profits while operations will be managed by a Reliance Retail wholly-owned company.

Compliance of Chinese firms with Indian regulations

Despite the challenges, more and more Chinese companies have taken significant steps to localise their operations.

Xiaomi India, Vivo, and Oppo have all been either set up or are in the process of setting up manufacturing units. Vivo is set to open its largest manufacturing facility in Greater Noida, Uttar Pradesh, this month. This unit came with an investment surpassing Rs 3,000 crore.

Vivo and Oppo have also started appointing Indian entities for distribution to comply with local regulations, while Transsion Technology Ltd has entered into an agreement with Dixon Technologies, Mint noted.

As Chinese smartphone makers seek to establish a stronger foothold in India, these collaborations could prove beneficial for both parties, leveraging the manufacturing and market strengths of Indian firms and the extensive product range and sales volume of Chinese brands.