Xiaomi, Vivo, Oppo: political tensions between India and China are hitting the smartphone market. But they need each other

Indians love Chinese smartphones, but over the past two months, New Delhi has stepped up surveillance of the three major Chinese companies – Xiaomi, Vivo and Oppo. Together, these companies control more than 60% of India’s smartphone market, according to data from research firm Counterpoint.

Xiaomi, the top-selling brand in the country, was the first company to face the heat from regulators. In May, the country’s leading financial investigation agency accused Xiaomi’s Indian subsidiary of carrying out illegal funds transfers, in violation of foreign exchange laws.

Xiaomi India said at the time that « all of our operations strictly comply with local laws and regulations ». He did not respond to further requests for comment this week by CNN Business.

Vivo, another big Chinese brand, was next on the list from India’s Law Enforcement Directorate. Earlier this month, the agency accused the company of tax evasion and said it raided 48 Vivo locations nationwide and seized $60 million from its bank accounts.

A Vivo spokesperson had told CNN Business that the company is « cooperating with authorities to provide them with all required information. » He also did not respond to a follow-up request.

And last week, Oppo became the latest Chinese smartphone maker to be targeted in India. The company sells popular Realme and OnePlus brands in the country, and India’s Directorate of Tax Intelligence has accused the company of evading around half a billion dollars in taxes.

Oppo did not respond to a request for comment.

Beijing, meanwhile, has blasted the raids on Chinese companies, saying India is damaging its reputation with foreign investors.

In a statement released earlier this month, the Chinese Embassy in India said the investigations were disrupting « normal business activities » and chilling « the confidence and will of market entities in other countries, including Chinese companies, to invest and operate in India ».

Why India is cracking down

Chinese tech companies have had a particularly tough time in India over the past two years, with New Delhi clamping down since border tensions escalated between the world’s most populous countries.

In 2020, India banned over 200 apps, many of which were Chinese, including the hugely popular video platform TikTok.

Chinese sellers have also come under the thumb of Indian regulators because « they have ‘grew very fast very fast,' » noted Tarun Pathak, research director at Counterpoint.

« India is looking for more clarity on how Chinese companies do business here, » he said. « Their records are under review. »

He added that the Indian government was toughening regulations for foreign phone makers because they realized that « these companies need India more than India needs them. »

Although regulatory repression is making it difficult to do business in India, experts say it is unlikely New Delhi would impose an outright ban on Chinese smartphones.

« Chinese companies are here to stay, » Pathak said, adding that there were « no other takers. »

South Korean giant Samsung is the second best-selling smartphone brand in the country and the only non-Chinese company among India’s top five sellers, according to data from Counterpoint. But it “cannot grow its market share from 20% to 60% overnight,” Pathak said.
Apple (AAPL) has big plans for India for years now but has only captured a tiny fraction of the market as its products are prohibitively expensive for most Indians.

Kiranjeet Kaur, associate research director at International Data Corporation (IDC), also expects these companies to rebound by the start of the shopping-driven Diwali festival season in India in October. She added that these probes would hardly matter to Indian consumers.

After the border clashes, calls for a boycott of Chinese companies, including phone makers, engulfed India, Kaur recalls.

Chinese phones are here to stay

Despite these protests, there has been « no drop in the number of shipments » from these companies, and they have continued to dominate the market, she added.

India’s love for Chinese smartphones transcends all political tensions, mainly because they are seen as great value in a very price-sensitive market.

While Indian makers have churned out affordable smartphones over the past few years, including one developed by Mukesh Ambani, the billionaire head of sprawling Indian conglomerate Reliance, in partnership with Google, these haven’t done much. noise from consumers.

“If you compare features, Chinese smartphones offer a lot more and only cost a little more,” Kaur said.

And, despite new legal challenges, China cannot afford to abandon 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 to all the big players, whether they’re American or Chinese, » he said. It is also the largest « emerging market » in the world since « nearly half of the country is still not connected to smartphones », he added.

The Covid-related slowdown in China, which has hammered consumer activity, is making India even more attractive to businesses across the border.

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