Major Chinese phone brands operating in India including Xiaomi, Oppo, Vivo, and Realme, are being required by Indian authorities to appoint Indian nationals in executive roles such as chief executive officer (CEO), chief operating officer (CPO), chief financial officer (CFO), and chief technical officer (CTO), according to Indian media outlet ET Telecom.
Why it matters: In light of ongoing geopolitical tensions, India and China have increased scrutiny of each other’s businesses, causing significant economic turbulence in recent years. The Indian government has again tightened restrictions on Chinese technology companies in the last few months, with experts predicting this will inevitably dampen investment by Chinese companies in the Indian market.
Details: The tussle between Indian authorities and Xiaomi has been escalating since the former launched an investigation into the latter last year. On June 9, the Enforcement Directorate (ED), an Indian financial law enforcement agency, issued a show-cause notice to Xiaomi India chief financial officer Sameer Rao, former global vice president Manu Kumar Jain, and three banks for alleged illegal remittances of 55.51 billion rupees ($673.2 million), according to a report by Indian news agency Press Trust of India.
- On June 13, the Indian government requested major Chinese phone brands involve local companies in the manufacturing process and develop local distributors for exports, according to Indian media outlet ABP News.
- On the same day, Xiaomi India responded to this announcement by saying that the company’s operations were compliant with local laws and regulations, according to Chinese media outlet National Business Daily.
- Last April, the ED summoned former Xiaomi global vice president Jain, who resigned this January, to cooperate with the federal investigation, alleging that the company had made illegal remittances by falsely presenting them as royalty payments to foreign entities. Xiaomi has since claimed that the royalty payments were for in-licensed technologies and intellectual property applied to Indian phone products.
- As part of the investigation, it is possible that the substantive frozen funds from three banks – Citibank, HSBC Bank and Deutsche Bank AG – may be confiscated by ED.
Context: In the first quarter of 2023, the top three phone brands in India were Samsung (with 20% of the market), Vivo (18%), and Xiaomi (17%), according to research platform TechInsights. Chinese phone brands account for about 50% of sales in the Indian phone market.
- Last December, a Vivo shipment of 27,000 cellphones from India to neighboring markets was detained by Indian officials. The shipment, worth nearly $15 million, was delayed for over a week because of an alleged misdeclaration of the device models and their value.
- Last June, the Indian government issued a show-cause notice to Oppo for allegedly evading customs duty of $550 million. Oppo says it has cooperated with the investigation since then; a final ruling in the case has not yet been announced.