India’s ban on 59 popular Chinese apps caught everyone off guard recently. The move came in the middle of a rising wave of anti-China sentiment in the country. This growing animosity has led to some drastic actions by fringe elements, including blockading the Oppo factory in India, but also acts of vandalism against storefronts stocking Chinese smartphones. So, what the heck is going on here?
The COVID-19 pandemic might have fueled negative sentiment against China, but the recent border skirmish between India and China has set the stage for a modern-day cold war. For now, this conflict is unfolding as a war between economies and trade, with technology being the unfortunate casualty.
The Sino-Indian border stretches 4,056 kilometers with at least 20 disputed regions, the Galwan valley being just one of them. While the real story is still in flux, India alleges that the Chinese military encroached on and laid claims on a 60km2 stretch of territory.
The rising tide of anti-China sentiment has been fueled by political parties, the Prime Minister’s call for self reliance and a broad focus on local manufacturing, as well as social media calls for a boycott on Chinese goods. This culminated in the ban of 59 popular apps under the guise of national security. These apps were alleged to promote activities that are “prejudicial to the sovereignty and integrity of India.” The list includes the social media behemoth TikTok, as well as popular apps like Mi Community, Weibo, WeChat, and BeautyPlus.
India is the shining star of growth in the global smartphone race. In fact, after China, it is the largest smartphone market in the world. However, in an increasingly globalized economy, India’s actions could have huge repercussions for the future.
India’s digital revolution was fueled by Chinese smartphone vendors bringing incredible value to the segment. Xiaomi occupies a 30.6% market share of India’s smartphone space. Four of the top-selling smartphone brands in the country are Chinese. Meanwhile, apps like TikTok have leveled the playing field by surfacing talent from the hinterland and giving them a global audience.
A common justification for the Chinese boycott is the idea that it will spur Indian brands and ecosystems. As it turns out, Xiaomi and other Chinese vendors flourished exactly because of the lack of quality options from Indian smartphone vendors.
Even for Indian-made smartphones, a large portion of the supply chain still relies on components imported from China and other countries. A study by Counterpoint Research and IIM-B claims that localization of components is still well under 30%. This is less than half of the 70% of the component localization seen in China.
Component localization in India is well under 30%.
Furthermore, a large portion of India’s telecom networks is built on equipment supplied by Huawei and ZTE. The cost of replacing Chinese-made components or even building indigenous alternatives, once again by licensing Chinese patents, is massive and is something that would inevitably be passed on to customers.
It’s not just smartphones and telecom. Some of the biggest Indian startups have Chinese funding behind them. Be it the Amazon competitor Flipkart, food delivery app Swiggy, or taxi aggregator Ola, China’s Alibaba and Tencent have invested billions to ensure their success.
In short, it’s nearly impossible to get Chinese tech out of India. Global supply chains and investments are so entrenched that you just can’t completely exclude a country, especially China. However, that doesn’t have to be the case.
India has been making strides under the “Make in India” scheme, which has a given a big boost to domestic manufacturing. Today, Xiaomi alone employs over 50,000 people in the country. This includes over 30,000 workers in manufacturing facilities, with the overwhelming majority being women. Oppo and Vivo are other Chinese brands that have set up full-fledged production plants in the country. This is employment, revenue, and taxation that goes directly to India.
With increasing efforts towards localization, India can play this to its advantage and build local tech talent. It needs a concerted effort and years of tech forward thinking, innovation, and investment to turn the tide around.
An arbitrary app ban sets a dangerous precedent, especially when placed in the context of an emotionally charged, nationalistic narrative. Already, some of the biggest smartphone brands in the country are facing the heat in terms of brand appeal. Indian authorities are even withholding inbound shipments from China, in a slippery slope that is bound to affect consumers sooner rather than later.
What happens when phone makers can’t get the components to make your favorite smartphone? No, the answer is not an alternate Indian brand rising to the occasion like a phoenix from the ashes. Instead, it’s the buyer who will have to deal with rising prices, reduced supplies, and a lack of options.
India is trying to create an app and technology ecosystem by stifling competition. In the process, it risks becoming the very thing it opposes. Mere days after the app ban, we’re already starting slapdash efforts to recreate a similar experience. However, copycat apps are just not going to cut it.
Homegrown alternatives to the banned apps, like Mitron, Chingaari, Roposo and ShareChat boast excellent user acquisition. But their feature set falls short, the UX is unpolished, and it remains unknown how well they’ll be able to retain users in the absence of a global context, as well as content.
Heavy-handed interventions risk alienating India from the global technology ecosystem.
Building a good ecosystem, be it of apps or hardware, takes time. It would be more beneficial for India to focus on the broader picture, while resolving political issues through diplomatic channels, rather than by making heavy-handed interventions in the industry.
These moves risk alienating India from the global technology ecosystem. The idea of building self-reliance through homegrown technology is incredible, but that cannot happen in isolation. The beauty of technology is that it’s inclusive, bursting bubbles to open access to the world.