On the Tarmac…
We have mentioned previously that the Indian government has been investigating a number of Chinese smartphone companies that operate on the sub-continent, with Xiaomi (1810.HK), Vivo (pvt) and Oppo (pvt) seemingly in the governmental crosshairs. While financials and business practices are certainly the focus of these investigations and a number of discrepancies have already been found, border conflicts between China and India have raised the level of tension between the two for the last 2+ years and have politicized the fact that Chinese companies are the dominant suppliers of smartphones to the Indian market with a 62.3% share in 3Q.
Things have taken a turn for the worse this week when Indian authorities halted the exportation of some 27,000 Vivo smartphones (value of ~$15m) from be shipped out of India to other countries. The Vivo phones were produced in India at Vivo’s Noida facility, which the company built in 2015 and has increased production from 50m units last year to 60m this year, with a target of 120m units in the future. Vivo can meet all of its smartphone demand for India itself currently and has just begun shipping the excess to nearby countries, such as Saudi Arabia and Thailand. The phones in question are being held at the New Delhi airport over questionable export declarations, particularly their value. India’s own cellular and electronics lobbying association wrote a letter to the government, asking for a quick release of the devices and how the incident is a negative toward the encouragement of manufacturing for export in the country, but the government has refused to comment on the investigation.
All in, the conflicts between China’s smartphone vendors and the Indian government will do little to encourage companies to establish or increase their manufacturing bases in India, but at the same time, Chinese smartphone brands have been playing fast and loose with import and export rules and have been extremely ‘creative’ when it comes to financials, finding many ways to show losses that allow for tax incentives and subsidies on a local basis, and profits for the parent companies in China. As India is relatively new to the global manufacturing world, and is somewhat unused to the ‘Chinese way’ of doing business under a totalitarian government that hides considerable graft and subterfuge, they seem to have decided to show that they will not stand for such double-dealing recently, and while that will counter some of their “Made in India” momentum, it does set the tone for a more rational approach to manufacturers from other countries, particularly semiconductor companies that might be looking to diversify away from China while still feeding a large and growing market.
As the two counties now have populations that are almost the same (China is the larger by 2.76%) and India is a Democracy while China is a single-party dictatorship, India’s show of strength toward Chinese companies, despite their dependance on, puts them in stead with the US and its allies, who are key to developing the infrastructure necessary to build India’s electronics and semiconductor business. Hopefully these skirmishes do not move Chinese smartphone vendors out of the country before others, such as Samsung (005930.KS), can fill the gap, although a key executive at Xiaomi’s India division resigned yesterday as the case against the company, whose assets have been seized, winds through governmental channels.
Things have taken a turn for the worse this week when Indian authorities halted the exportation of some 27,000 Vivo smartphones (value of ~$15m) from be shipped out of India to other countries. The Vivo phones were produced in India at Vivo’s Noida facility, which the company built in 2015 and has increased production from 50m units last year to 60m this year, with a target of 120m units in the future. Vivo can meet all of its smartphone demand for India itself currently and has just begun shipping the excess to nearby countries, such as Saudi Arabia and Thailand. The phones in question are being held at the New Delhi airport over questionable export declarations, particularly their value. India’s own cellular and electronics lobbying association wrote a letter to the government, asking for a quick release of the devices and how the incident is a negative toward the encouragement of manufacturing for export in the country, but the government has refused to comment on the investigation.
All in, the conflicts between China’s smartphone vendors and the Indian government will do little to encourage companies to establish or increase their manufacturing bases in India, but at the same time, Chinese smartphone brands have been playing fast and loose with import and export rules and have been extremely ‘creative’ when it comes to financials, finding many ways to show losses that allow for tax incentives and subsidies on a local basis, and profits for the parent companies in China. As India is relatively new to the global manufacturing world, and is somewhat unused to the ‘Chinese way’ of doing business under a totalitarian government that hides considerable graft and subterfuge, they seem to have decided to show that they will not stand for such double-dealing recently, and while that will counter some of their “Made in India” momentum, it does set the tone for a more rational approach to manufacturers from other countries, particularly semiconductor companies that might be looking to diversify away from China while still feeding a large and growing market.
As the two counties now have populations that are almost the same (China is the larger by 2.76%) and India is a Democracy while China is a single-party dictatorship, India’s show of strength toward Chinese companies, despite their dependance on, puts them in stead with the US and its allies, who are key to developing the infrastructure necessary to build India’s electronics and semiconductor business. Hopefully these skirmishes do not move Chinese smartphone vendors out of the country before others, such as Samsung (005930.KS), can fill the gap, although a key executive at Xiaomi’s India division resigned yesterday as the case against the company, whose assets have been seized, winds through governmental channels.
India Smartphone Market Share - 2020 - 2022 YTD - Source: SCMR LLC, various
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