India Can’t Hang Up on Chinese Smartphones

India and China are in trouble again, but it’s not on the border. India is investigating the local subsidiary of Chinese smartphone maker Xiaomi for alleged illegal royalty payments to foreign entities. Xiaomi has denied any wrongdoing and has complained to the court that India’s financial crime agency used threats of physical violence to extract confessions, according to Reuters.

The relationship between Asia’s largest and third largest economies is nothing if not acrimonious. But high drama conceals significant bilateral dependence on both sides – especially in the mobile phone sector. This latest controversy is unlikely to derail a mutually beneficial relationship unless the Indian courts take a clear political stance against Xiaomi.

The accusations of intimidation, which India’s ominously named Enforcement Bureau denies, have prompted China to openly support Xiaomi. China’s Foreign Ministry said last week it hoped India would provide a non-discriminatory business environment for its companies, carry out law-abiding investigations and enhance the trust of its companies. international investors. The case is currently awaiting settlement by the Indian court.

The latest flare-up of tensions recalls 2020, when relations between the two countries deteriorated after a bloody border clash. Since then, India has banned more than 300 Chinese apps — including TikTok — and tightened standards for Chinese companies investing in India. But this widely publicity aside, India and Chinese smartphone makers need each other.

According to Counterpoint data, Chinese smartphone makers have been gaining market share in the country for years. Despite the Indian government’s rhetoric about self-reliance, border conflicts and recent component shortages, Chinese smartphone companies’ share in the Indian market has grown to 76 % in 2021 from 60% in 2018. Of the top 5 selling smartphone brands in India, four of them are Chinese with Xiaomi as the market leader, accounting for 24.9% market share. Samsung is the only non-Chinese brand in the top.

Shilpi Jain, a research analyst at Counterpoint, notes that despite significant anti-China sentiment in the country in 2020 following the Covid-19 pandemic and border disputes, Indians are slowly turning back with Chinese smartphones due to the scarcity of affordable alternatives. Samsung, Nokia and several Indian brands have lost market share in India over the years to Chinese smartphone makers.

Counterpoint data also shows that most Chinese smartphones sold in India are made in India – a driving force behind the Modi government’s goal of making India a hub for power generation. death. Only 0.6% of the 127 million Chinese smartphones sold in India in 2021 will be imported.

To be sure, the dependency isn’t just one-way. India is already the second largest smartphone market in the world and much of its potential remains untapped. According to Counterpoint, India accounts for 17% of China’s total global smartphone shipments in 2021, behind 31% of mainland China. Other Asia-Pacific countries account for 14% of total global shipments for Chinese brands.

The business relationship between the two countries that have been at war in the past has not always been easy. But when it comes to smartphones, India and China have yet to be satisfied with each other.

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