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Daily Authority: 📲 India vs China

Xiaomi India vs India is an uneasy fight yet close alliance

Published onMay 16, 2022

Xiaomi logo on red digital background
Kris Carlon / Android Authority

🎸 Good morning! I was at Tool last night here in Berlin! I’m still somewhat dazed. What a show…

India vs China: Frenemies

Xiaomi India
Xiaomi India MD Manu Jain (R) and Hon Hai Technology Group (Foxconn) India head Josh Foulger.

India Can’t Hang Up on Chinese Smartphones” is the title of a piece in the Wall Street Journal today, neatly tackling the on-again/off-again rivalry between the two most populous countries on the planet, that’s now focused on Xiaomi in India, with neither party able to leave the other.

  • (Image above is of Xiaomi’s former head of India, and now global VP, Manu Jain, at a domestic Hon Hai Technology Group (Foxconn) facility with Hon Hai Technology Group (Foxconn) India’s Josh Foulger.)

What’s happened:

  • Throughout 2022, India has been issuing massive fines following investigations running for some months.
  • Here’s the summary from the piece: “India and China are in a standoff again, but it isn’t at the border. India is investigating Chinese smartphone maker Xiaomi’s local subsidiary for alleged illegal royalty payments to foreign entities. Xiaomi has denied any wrongdoing and has complained to the courts that India’s financial crime-fighting agency used threats of physical violence to extract confessions, according to Reuters. The relationship between Asia’s largest and third-largest economy is nothing if not acrimonious.”
  • There’s been two massive fines and some smaller ones: India’s finance crime-fighting agency, the Enforcement Directorate, recently seized a whopping $725 million from Xiaomi India.
  • The Directorate alleged Xiaomi India “had made illegal remittances to foreign entities by passing them off as royalty payments.” (Reuters).
  • Another $478 million was “frozen” in February.
  • And another case earlier in the year from a different investigation saw Xiaomi having to pay $84.5 million for allegedly evading some import taxes.
  • Various court cases to resolve the allegations are in effect, with one High Court unfreezing some of the cash and allowing Xiaomi to at least continue to operate in India.
  • In total, fines and seizures equate to about half of Xiaomi’s annual profit. It’s a big, big deal.

But Xiaomi and India won’t be breaking up:

  • That’s the outcome predicted by the WSJ: India, and Chinese smartphone makers, need each other.
  • Quote: “Chinese smartphone players have been gaining market share in the country for years, according to Counterpoint data. Despite the Indian government’s rhetoric on self-reliance, the border clashes, and recent component shortages, Chinese smartphone companies’ share of the Indian market increased to 76% in 2021 from 60% in 2018. 
  • “Of the top five best-selling smartphone brands in India, four of them are Chinese, with Xiaomi being the market leader, holding a 24.9% market share. Samsung is the only non-Chinese brand in the top tier… Samsung, Nokia, and some Indian brands have lost market share in India over the years to Chinese smartphone makers.”
  • In addition, almost all of the Chinese smartphones in China are made in India: only 0.6% of 127 million sold last year were imported, and India accounted for 17% of global Chinese smartphone shipments, again according to Counterpoint.

What’s next?

  • The potential for an Indian brand to disrupt the Indian domestic market seems to be there. By having manufacturing in the company, India will be growing its own manufacturing skill base.
  • The problem is that the smartphone market is already largely saturated; phones at the value-end are hard to differentiate, and regular deals and sales cut margins to almost nothing on hardware, with some long-term earnings from ads, software, and ecosystem sales.
  • A new major Indian entrant that could actually take market share would likely need to persist through making steep losses for some years.


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Monday Meme

A new twist on an old Simpsons classic:

another meme

Have a great start to your week!

Tristan Rayner, Senior Editor

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