India issued show-cause notices to Xiaomi and Indian executives

Jingyue Hsiao, DIGITIMES Asia, Taipei 0

Credit: AFP

The Indian government issued show-cause notices to Xiaomi, Xiaomi's officials, and several banks over alleged illegal remittances as the China-based smartphone vendor is quickly losing its market share in India.

Reuters and The Economic Times reported that the Enforcement Directorate's Adjudicating Authority issued show-cause notices to Xiaomi Technology India Private, Manu Kumar Jain, and Sameer B Rao, former managing director and current CFO of the company, respectively. Three banks, including Citi, HSBC, and Deutsche Bank, also received show-cause notices.

Typically, companies are issued show-cause notices to justify why the federal agency should refrain from acting against them for their alleged wrongdoing.

The Enforcement Directorate alleged that since 2015, Xiaomi Technology India Private had been making illegal remittances totaling INR55.51 billion (US$673.2 million) in the guise of royalties to foreign entities, including Qualcomm and Xiaomi's subsidiaries in China, and seized Xiaomi's assets in April 2022, which reduced Xiaomi's cash flow for local operations in India, including for expanding marketing campaign required in the smartphone market, especially when India's smartphone market has seen weak demand due to components shortage and macroeconomic headwinds such as inflation.

According to IDC's market tracker, smartphone shipments of Xiaomi, the market leader for years until 2023, in India peaked in the third quarter of 2021 before declining for six consecutive quarters, reaching only five million units and falling behind Samsung, Vivo, and Oppo in the first quarter of 2023.

In order not to become a target of the Indian government amid a souring India-China relationship, Bloomberg and The Economic Times reported that Xiaomi had gotten more Indian suppliers on board for making its smartphones and Bluetooth neckband earphones.