Chinese smartphone firms need to commit to exports and increase value additions from India, says MeitY

The Ministry of Electronics and Information Technology (MeitY) has asked Chinese device makers to push exports from India and also bolster their supply chain in the country to increase value additions. A few such companies, such as Oppo, are already preparing a road map for the same, according to sources.

A senior government official in MeitY said: “Yes! We have had meetings with Chinese device makers both collectively and individually and have asked them to participate in exports from India. We have an ambitious target of producing mobile phones worth $126 billion in India by FY26, half of which will be for exports. We also asked them to strengthen their supply chain in the country. And they have said ‘yes’.”

On the Chinese complaining that India’s FDI rules have stymied the entry of Chinese component suppliers to set up shop in the country, the official said: “There are component manufacturers in many other countries too. And there are many domestic suppliers. They (Chinese mobile device brands ) can always work with them and grow.”

MeitY’s push is significant because Chinese device makers, despite dominating the Indian market, have stayed away from exporting from the country and building an ecosystem of suppliers to help increase value addition. While some Chinese firms have their own facilities, others have opted for contract manufacturing.

According to estimates, Chinese device manufacturers together account for over $26 billion in revenues (as of FY22) or nearly 75 per cent of the total Indian market. The phones that they manufacture in India have a value addition of just 12-18 per cent only.

Also, their exports from the country are negligible over the past 10 years. But in FY22, over $5 billion worth of phones were exported from India. Though Chinese phone makers dominate the Indian market, US-based Apple was one of the key exporters.

But the scenario may change in the coming years. Oppo, for instance, has said it will invest $60 million in India over five years to strengthen its manufacturing ecosystem by involving SMEs and MSMEs. And it expects this shall help it increase its India export capacity to $5 billion in the next five years. It has also promised to partner with more local suppliers.

Chinese mobile companies, such as Xiaomi, Oppo, and Vivo, have recently come under scrutiny from various government agencies over alleged violations of Indian laws.

In an interview with Business Standard, Minister of State at MeitY Rajeev Chandrasekhar pointed out that a few Chinese companies with hazy economic and business models disrupted a large number of Indian brands and grabbed market share from them in a way “that we do not consider as being purely on the basis of free and fair competition”.

There have been discussions in government circles to rein in Chinese domination in the mobile device market by reserving the sub- Rs 10,000 mobile phone market for domestic brands. Many Indian device makers have shut shop; the ones that are eligible for the production-linked incentive scheme are not able to meet even the investment or the production criterion for getting the incentives. The government is already working on a strategy to resolve issues faced by potential domestic champions.

However, the move has raised concerns among telecom firms, who argue that the growth of 5G services shall be dependent on cheaper sub-Rs 10,000 5G phones, which may come only from Chinese brands. They have already brought down 5G phone prices to sub Rs 13,000.

The Chinese have leveraged open access to the Indian market for years and that has helped them gain market share relatively soon from domestic brands. For instance, according to TechArc, which studied the relative volume market of only Chinese and Indian brands in smartphones, the share of Chinese brands, which was 32 per cent in 2015 (when domestic brands held over 68 per cent of the market), went up dramatically to hit 99 per cent in 2020; Indians brands, on the other hand, accounted for only 1 per cent of the market.

Even in the sub Rs 10,000 smartphone category, Indian brands in 2015 accounted for 66 per cent of the market, and the Chinese were last in the pecking order with just 12 per cent share (others which included South Korean, Japanese, and other brands held a 22 per cent share). In just six years, the entire market changed: Chinese brands are now the king with a 98 per cent market share, while others, including Indian brands, account for the rest. Business Standard