JW Insights: China mobile phone brands are under increasing challenges in In...

By Kate Yuan

China’s smartphone makers are suffering from local policies and market changes after raging development. JW Insights’ analyst Xu Zhiping reviewed the process of Chinese mobile phone makers developing in the Indian market and warned of more uphill battles ahead.

After over a decade of struggling and growing against European and U.S. brands that had dominated Chinese markets, Chinese mobile phone brands matured around 2014 with Huawei, OPPO, vivo, and Xiaomi becoming the winners in the country's domestic market. Fierce competition followed among them, and many companies began to turn eyes on the overseas markets. The Indian market became their first choice, with its huge number of consumers and weak local industries.

By the end of 2016, Chinese mobile phone brands took more than half of the Indian market from merely 19% in 2015.

Then Indian government introduced more tariffs and other restrictive policies. Chinese companies responded by building factories in India, including many component and supply chain companies. These moves helped India's mobile phone industry clusters shape up, from ODMs and assemblers (Foxconn and Wingtech), to core component suppliers (O-Film, Tongxingda and TCL CSOT), and accessory makers.

India’s smartphone market remains healthy. The shipments reached 36.4 million units in the second quarter of 2022, falling by 5% month on month, but up 12% year on year, according to market research agency Canalys.

From market statistics, Chinese smartphone brands still look good in India. Among the top five, four are from China: Xiaomi, realme, vivo, and OPPO, with Samsung being No.2 and they take up 86% of the market share.

But behind the still impressive market figures, Chinese players in India have faced increasing challenges and suffered losses in more intensified competition over the last two years.

The top five Chinese manufacturers in India are coming under more scrutiny by local authorities this year.

On August 3, India’s Directorate of Revenue Intelligence (DRI) accused vivo of 22.17 billion rupees ($277.96 million) of tax evasion, saying it intentionally made false declarations for certain imported products.

Earlier in July, Indian Enforcement Directorate blocked 119 bank accounts related to vivo's Indian operations, totaling 4.65 billion rupees ($58.3 million) on suspicion of money-laundering. They also raided vivo’s 48 offices and 23 related entities across the country.

OPPO also got similar charges in July. The Indian Ministry of Finance said in a statement on July 13 that DRI found OPPO evaded nearly 43.9 billion rupees ($551 million) tariffs.

In January this year, the Finance Ministry accused Xiaomi of evading taxes of 6.53 billion rupees ($81.87 million).

Honor had even withdrawn from the Indian market. Zhao Ming, CEO of Honor, pointed out, “In fact, about 80% of China’s small and medium-sized factories in important industrial chains in India such as mobile phones have bankrupted. Although companies like OPPO, Vivo, and Xiaomi still operate in India, they are experiencing rough days.”

Realme, a brand set up to compete with Xiaomi in the Indian market, has also turned to the domestic market.

In early August, the Indian authorities issued new regulations to restrict China-made smartphones from being sold in India at prices below 12,000 rupees ($150).

Industry observers see the similarity between the Indian smartphone market now and China’s market ten years ago: backward industry and weak consumer purchasing power, and dominance by foreign companies. Despite the limited progress the local Indian industry has made, there is great potential for growth.

It is time for Chinese smartphone companies to review their developments and strategies in India. There is also tremendous uncertainty depending on the Indian policies and geopolitical changes.