Xiaomi raises concerns over government scrutiny, seeks manufacturing incentives

Xiaomi raises concerns: Smartphone giant Xiaomi has conveyed to the government its apprehensions regarding the reluctance of smartphone component suppliers to establish operations in the country amid heightened scrutiny of Chinese companies by the government. 

According to a letter and a source with direct knowledge of the matter, Xiaomi has stressed the need for the government to provide manufacturing incentives and lower import tariffs for specific smartphone components.

The Chinese company, which holds an 18 per cent share in India's smartphone market, assembles smartphones locally with a majority of components sourced domestically, while some are imported from China and other countries. 

Xiaomi's letter, dated February 6, responds to an inquiry from the Information Technology Ministry regarding the development of the country's component manufacturing sector.

The government’s intensified scrutiny of Chinese businesses following a border clash in 2020, leading to disruptions in investment plans and repeated protests from Beijing. 

While Chinese companies operating in India have been cautious in discussing the scrutiny publicly, Xiaomi's letter underscores ongoing challenges in the Indian market, especially in the smartphone sector, where critical components originate from Chinese suppliers.

In the letter, Xiaomi India President Muralikrishnan B stressed the importance of "confidence-building" measures to encourage component suppliers to establish local operations. 

He noted concerns among suppliers regarding compliance, visa issues, and other factors hindering operations in India.

The letter also urged the government to address these concerns and instil confidence among foreign component suppliers to promote local manufacturing. Xiaomi and the IT ministry have yet to respond to requests for further information and comment.

Notably, Indian authorities have accused Chinese smartphone company Vivo Communication Technology of breaching visa rules and syphoning funds from India, while freezing over $600 million in Xiaomi assets for alleged illegal remittances.

Beyond regulatory scrutiny, the government has banned over 300 Chinese apps since 2020 and halted planned projects by Chinese automakers BYD and Great Wall Motor.

Executives of Chinese electronics firms reportedly face challenges in obtaining visas for India, and their companies encounter delays in investment clearances due to heightened scrutiny by the government.

Xiaomi's letter also advocates for lower import tariffs on sub-components used in batteries, USB cables, and phone covers to enhance India's manufacturing competitiveness. 

While the government recently reduced import taxes on specific components, Xiaomi suggests that larger incentives are necessary to attract component manufacturers to establish operations in India.

(With Reuters Inputs)