Biting the Hand that Feeds You in India…
In our 05/02/22 note we indicated that despite Xiaomi (1810. HK) being the best-selling smartphone on the subcontinent only a month before, the government of India decided to freeze the company’s assets, continuing an investigation that accused the company of transferring large amounts of capital out of the country under the guise of 'royalty payments’ that violated Indian statutes. The government alleged that since 2015 Xiaomi had been using this method to move what was alleged to be over $680m, with the implication that company employees had given misleading information to local banks in order to exact the transactions.
It seems that Xiaomi’s appeal fell on deaf ears as the Appeals Court agreed with the earlier decision and confirmed the legality of the seizure of $682m in Xiaomi assets, of which ~84% is said to be royalty payment to be made to Qualcomm (QCOM), with both companies supporting each other in that they agree that a legal agreement to license Qualcomm’s IP was the ultimate end for the capital transferred, with Xiaomi adding, “We will continue to use all means to protect the reputation and interests of the company and our stakeholders,” although it is going to be a difficult task considering India has also accused and fined a number of other Chinese smartphone brands over violations said to have been made in recent years.
Under the more obvious alleged violations, there has been considerable bad vlood between China and India over border conflicts that began in 2020 when conflicts over a road being built by Indian workers was said to cross into disputed land between the two countries. Since then India has been closely watching for incursions by Chinese military, and has taken a very aggressive stance toward Chinese smartphone brands, we believe partly as a a public face toward Chinese aggression, but also as a way to lessen the dominance that Chinese smartphone brands have in India, in order to give Indian brands a helping hand. While whether the allegations against Xiaomi, Oppo (pvt) and other Chinese smartphone brands are legitimate or not, the conflict does not help India’s programs to encourage display and semiconductor companies to build actual production facilities on the sub-continent, especially given the history of the Indian government’s incentive programs, which have come and gone a number of times as administrations changed. Not quite biting the hand that feeds you, but maybe nipping at the fingers…
It seems that Xiaomi’s appeal fell on deaf ears as the Appeals Court agreed with the earlier decision and confirmed the legality of the seizure of $682m in Xiaomi assets, of which ~84% is said to be royalty payment to be made to Qualcomm (QCOM), with both companies supporting each other in that they agree that a legal agreement to license Qualcomm’s IP was the ultimate end for the capital transferred, with Xiaomi adding, “We will continue to use all means to protect the reputation and interests of the company and our stakeholders,” although it is going to be a difficult task considering India has also accused and fined a number of other Chinese smartphone brands over violations said to have been made in recent years.
Under the more obvious alleged violations, there has been considerable bad vlood between China and India over border conflicts that began in 2020 when conflicts over a road being built by Indian workers was said to cross into disputed land between the two countries. Since then India has been closely watching for incursions by Chinese military, and has taken a very aggressive stance toward Chinese smartphone brands, we believe partly as a a public face toward Chinese aggression, but also as a way to lessen the dominance that Chinese smartphone brands have in India, in order to give Indian brands a helping hand. While whether the allegations against Xiaomi, Oppo (pvt) and other Chinese smartphone brands are legitimate or not, the conflict does not help India’s programs to encourage display and semiconductor companies to build actual production facilities on the sub-continent, especially given the history of the Indian government’s incentive programs, which have come and gone a number of times as administrations changed. Not quite biting the hand that feeds you, but maybe nipping at the fingers…
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