- None of the smartphone or consumer durable companies with origin in China have deferred their capex plans in India
- Most companies have domestic manufacturing in India so curbs on imported goods from China have not impacted them significantly
- Chinese smartphone makers account for over 70 percent of India's domestic market. Xiaomi has been the market leader for over three years.
- New entrants are, however, facing headwinds as clearances are held up. Great Wall Motors, Huawei, ZTE and Foton have an uncertain path ahead.
Undeterred by adversity all around, companies with origins in China that have made steady inroads in India's domestic electronic goods market over the last decade remain committed to what they say is a lucrative and profitable market in India. A host of companies that BusinessToday.In reached out to in the smartphone and consumer electronics sectors say they have neither put off their future investments in the country nor altered their product launches in any significant manner. This despite the fact that the Indian government is actively looking at ways to diminish the role of Chinese companies in Indian market. Additionally, the mood of the nation seems to have also turned against them with campaigns for a boycott of Chinese goods being run all over the country.
Consumer electronics firm TCL said it has already made investments to the tune of Rs 2,400 crore at its factory in Tirupati and is gearing up to launch a complete IOT package of smart products. "Our investments is to ensure we keep launching new products such as the recent Qled TV line up. We have witnessed a growth 3 times more than that of 2018," says Mike Chen, General Manager, TCL India. "We also launched a smart AC recently and going forward we want to bring products that gives you complete IOT package of smart living. We will be making an announcement soon."
Smartphone maker Vivo has also committed a mega Rs 7,500 crore investment to increase capacity at its Greater Noida factory to 120 million smartphones per annum. It is also investing in a design centre and has plans to ramp up local sourcing of the components that go into its smartphones from 15 to 40 percent in the next year alone. It is being done in line with government's overall policy directive of reducing imports and increasing self sufficiency.
"We wholeheartedly support our Prime Minister Narendra Modi's vocal for local programme. All our phones are 100 per cent made in India but we want to take it up further. Our investment of Rs 7,500 crore will enhance capacity at the Greater Noida factory from 30 million to 120 million making it one of the biggest smartphone factories in the country," said Nipun Marya, director for brand strategy, Vivo India.
Vivo registered a growth of 40 per cent in smartphone shipments in the first quarter of 2020 compared to the same period in 2019 that gave it a market-share of 17 per cent. This came on the back of a 76 per cent growth in calendar year 2019. "With this increase in capacity the number of workforce at the factory will increase to 50,000 Indians. Also, we are increasing local sourcing for our phones from the current 15 to 40 percent, that signifies a 200 percent jump in sourcing in the next one year," Marya added. "We will also set up an industrial design centre in India which will ensure that our phones are not only made in India but also designed in India. The first such phone will be rolled out in the market by 2021."
Chinese smartphone makers including Vivo along-with market leader Xiaomi, Oppo, Realme and Oneplus have a vice like grip in the Indian market. Cumulatively they accounted for nearly 80 percent (Q4 2019-20) of the domestic sales and have come to symbolise China's increasing presence in the Indian market. Not surprisingly, this is a segment which is facing most of the consumer backlash as well. Organisations like Confederation of All India Traders have trained guns on smartphone companies and exhorted Indian actors, cricketers and celebrities to stop endorsing their products. The negative publicity has made a dent with their cumulative share in smartphone category declining to 72 percent in Q1 of 2020-21.
"This was mainly due to the mixture of stuttering supply for some major Chinese brands such as OPPO, Vivo and Realme, and growing anti-China sentiment that was compounded by stringent actions taken by the government to ban more than 50 apps of Chinese origin and delay the import of goods from China amid extra scrutiny," said Shilpi Jain, Research Analyst at Counterpoint Research. "This all resulted from the India-China border dispute during June."
Following escalation of tension at the border in mid June 2020, the Indian government has taken a number of policy decisions to ring-fence the domestic economy from China's influence. These include greater scrutiny of investments from China, an outright ban on telecom equipment from there, rescinding contracts mainly in infrastructure projects where Chinese companies have been participants and banning 59 Chinese applications citing data security.
Yet, the impact of these on the morale of Chinese firms has been negligible at best. In early May, Xiaomi for example said it does not need a fund infusion from its parent firm in China so the government's tweaking of FDI rules does not affect it. Neither does it believe the anti-China sentiment will have a long-term impact on its prospects. Xiaomi has a 30 percent share in the smartphone market in India and has been the market leader for three years now.
"Beyond the first year, we have always been profitable. There has been no requirement for our parent company to put in money for our core business expansion and growth. So we are not impacted by this as we do not require any new investment," Xiaomi's managing director Manu Jain had said in May. "I have seen some of those comments (anti-China) on social media but I do not think it will impact our business. At this time emotions are high and people tend to look for something to blame. But as things settle down they will understand that the virus is not country specific and they will not take it out on any specific country."
The company did not wish to respond to fresh questions from BusinessToday.In this time. With an aim to drastically reduce dependence on imports from China, the government is working on a policy which would seek to make life difficult for any company that imports a lot of parts from across the border. For example to check import of television sets from China, the government on July 31 amended the import policy of colour television from free to restricted category. Anybody hoping to import TVs from China would now have to seek a license from the government. This was expected to be a bombshell for Chinese firms but it has not had the desired effect.
"We have tied up with 3 big factories to help support localisation of products for Diwali itself so we are already prepared," says Chen of TCL. "The only thing is the India market still needs time to manufacture 70 inches or 85 inches TVs." The only real casualties of the quick change in relations between the two Asian giants could be telecom equipment provider Huawei and SUV maker Great Wall Motors. After facing reversals in the US, UK, Japan, Taiwan, Australia and New Zealand, it is almost certain India will block Huawei's participation in 5G trials in the country.
Similarly, Great Wall Motors hit a wall merely hours after signing an MoU with the Maharashtra government in mid June. The MoU has been set aside as the project needs clearance from the central government. GWM was hoping to launch its India operations by June 2021, but it is unlikely to get a clearance anytime soon, which will impact its timelines. About three dozen other proposals from China are awaiting clearances as well. GWM may set the template for others. "Nothing to do but wait. Anyway our plans would have been delayed due to the pandemic but things are pretty dark right now. There is no guarantee we would be allowed to set up shop at all," an official with GWM said.
Both the companies did not officially respond to BusinessToday.In for this story.