India is cracking down on companies that make the country’s most popular smartphones.
Indians love Chinese smartphones, but in the last couple of months, New Delhi has stepped up regulatory scrutiny of three top Chinese companies – Xiaomi, Vivo and Oppo.
Together, these companies control more than 60% of the Indian smartphone market, according to data from research firm Counterpoint.
Xiaomi, the best-selling brand in the country, was the first company to face the heat of regulators.
In May, the country’s top financial investigation agency accused Xiaomi’s Indian subsidiary of making illegal remittances in violation of foreign exchange laws.
Xiaomi India said at the time that “all operations are in compliance with local laws and regulations”. She did not respond to further requests for comment this week by the CNN Business International.
Vivo, another major Chinese brand that, despite its name, is not linked to the Brazilian operator, was next on the list of India’s Executive Board.
Earlier this month, the agency accused the company of tax fraud and said it had searched 48 Vivo locations in the country and seized US$60 million from its bank accounts.
A Vivo spokesperson told CNN Business that the company “is cooperating with the authorities to provide all necessary information”. It also did not respond to a follow-up query.
And just last week, Oppo became the latest Chinese smartphone maker to be targeted in India.
The company sells the extremely popular Realme and OnePlus brands in the country, and India’s Directorate of Revenue Intelligence has accused the company of evading around half a billion dollars in taxes.
Oppo did not respond to a request for comment.
Meanwhile, Beijing has criticized the attacks on Chinese companies, saying India is damaging its reputation among foreign investors.
In a statement earlier this month, the Chinese Embassy in India said the investigations were disrupting “normal business activities” and dampening “the confidence and willingness of market entities in other countries, including Chinese companies, to invest and operate in India.” .
The causes of Indian repression
Chinese tech companies have had a particularly difficult time in India over the past two years, with New Delhi cracking down since border tensions rose between the world’s most populous countries.
In 2020, India banned over 200 apps – many of which were Chinese, including the popular video platform TikTok.
Chinese suppliers are also under the control of Indian regulators because “they have grown so quickly,” noted Tarun Pathak, Counterpoint’s director of research.
“More clarity is being sought by India on how Chinese companies do their business here,” he said.
“Their balance sheets are now being scrutinized.”
He added that the Indian government is tightening regulations for foreign phone makers because they have realized that “these companies need India more than India needs them.”
While regulatory crackdowns are hampering business in India, experts say it’s unlikely New Delhi would ban Chinese smartphones altogether.
“Chinese companies are here to stay,” Pathak said, adding that “there are no other buyers.”
South Korean giant Samsung is the second best-selling smartphone brand in the country and the only non-Chinese company in the top five in India, according to Counterpoint data.
But “you can’t increase your market share from 20% to 60% overnight,” Pathak said.
Apple has had big plans for India for years but has only captured a small share of the market as its products are prohibitively expensive for most Indians.
Kiranjeet Kaur, associate research director at the International Data Corporation (IDC), also expects these companies to rebound when the shopping-driven Diwali festival season begins in India in October.
She added that these probes would hardly matter to Indian consumers.
After the border clashes, calls to boycott Chinese companies, including phone makers, have taken hold in India, Kaur recalls.
Chinese phones are here to stay
Despite these protests, “there was no drop in the number of shipments” from these companies, and they continued to dominate the market, he added.
India’s love for Chinese smartphones transcends any political tension, particularly as they are seen as great value in a highly price-sensitive market.
While Indian manufacturers have created affordable smartphones in recent years — including one developed by Mukesh Ambani, the billionaire head of the sprawling Indian conglomerate Reliance, in partnership with Google — they have failed to make much of an impact among consumers.
“If you compare features, Chinese smartphones offer a lot more and cost a little more,” said Kaur.
And despite new legal challenges, China cannot afford to leave the Indian market. The South Asian country of more than 1.3 billion people is the world’s second-largest smartphone market after China, Counterpoint’s Pathak said.
“India is super important for all the big players, whether American or Chinese,” he said.
It is also the biggest “emerging market” in the world, as “almost half of the country is still not connected to smartphones”, he added.
The Covid-19-related slowdown in China, which has dampened consumer activity, makes India even more attractive to businesses across the border.
Source: CNN Brasil
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