While India is not against Chinese companies forming JVs with Indian telecom companies for setting up manufacturing units in India (and transferring knowhow), the authorities have been strict on all other aspects. The trusted sources approval has not been received by either Huawei or ZTE, resulting in the Chinese gear manufacturers being left out in the 5G orders recently placed by RJio and Bharti Airtel. Nokia, Ericsson and Samsung were the gainers. They are currently only servicing the existing networks with the two telcos.
Ericsson, Nokia, Cisco and Tejas had received trusted sources approval from the National Cyber Security Coordinator (NCSC) way back in November 2021, and HFCL thereafter in December 2021. Both Huawei and ZTE are seeking the approval under the Indian Registered Entity (IRE) category. However, multinational companies with local manufacturing either directly or through EMS, or contract manufacturers, will be considered for approval under the Indian Registered (IR) category similar to domestic vendors. The telcos are restricted to placing orders only on vendors with this approval.
The two large Chinese vendors in India, Huawei and ZTE have also seen major attrition, with Huawei now having only 200 employees (the figure was 1500 in 2020) and ZTE reduced to 150 employees (the figure was 1000 in 2020).
Huawei’s bank accounts have been frozen since February 2022, when the Income Tax Department alleged manipulation of account books for reducing taxable income in the nation after conducting raids at its premises. How had the vendor repatriated Rs 750 crore to its parent company in China the form of dividends for at least two financial years, when its revenue had reduced drastically, was the objection. Huawei had then appealed to the Delhi High Court that this had majorly affected the company’s business.
India had become wary ever since June 2020 when 20 Indian soldiers were killed in the violent face-off with China in Galwan valley in Eastern Ladakh.
The Chinese have been facing adversity internationally, ever since in October 2021, the US Federal Communications Commission (FCC), citing significant national security concerns, took a decision that China Telecom Americas must now discontinue US services within 60 days. China Telecom, the largest Chinese telecommunications company had authorisation to provide telecommunications services for nearly 20 years in the United States. And many other countries had followed thereafter.