Chinese companies reportedly prefer outsourcing to Indian partners to investing amid souring bilateral relations

Jingyue Hsiao, DIGITIMES Asia, Taipei 0

Credit: AFP

China-based smartphone makers are reportedly talking with Indian EMS providers for mobile phone manufacturing, as Chinese investments in the South Asian country fell significantly in recent years amid intensifying scrutiny against Chinese entities and nationals in India.

The Economic Times, citing sources, reported that BBK Group, the parent company of Vivo, Oppo, Realme, and OnePlus, started outsourcing mobile phone manufacturing to India-based companies, including Dixon Technologies and Karbonn Group. Sources said Karbonn has a monthly production capacity of one million phones for Vivo and Realme, and Dixon has a lower capacity at the initial stages.

The rumor came after Dixon revealed it had secured mobile phone manufacturing orders from two global companies at the end of January when the company released its earnings report for the fiscal quarter that ended in December.

Atul Lall, managing director of Dixon, said at the earnings call that the company acquired two large customers; production for one of the customers will begin in the next couple of months, and production should commence in February or March for the other customer, adding that the company expects very decent volumes from these two new customers.

Lall further elaborated that Dixon targeted trial production within February and March for one of the customers and expects commercial production to start in April, adding that it's within the top three or four brands in India, and the other brand is a very large global brand that requires certain specialized production lines, which takes four or five months to start commercial production for the company.

As China-based companies face a series of legal and tax issues in India, they are reportedly wary of expanding their investment there. Reuters reported that Xiaomi sent a letter to the Indian government saying that China-based component suppliers are hesitant about setting up operations in India. The Economic Times quoted sources saying that the Indian government is cautious about allowing visas to Chinese nationals.

Meanwhile, the Indian government is concerned that Indian industries are not benefitting from Chinese dominance in the smartphone market, as China-based smartphone vendors are partnering with Chinese instead of Indian partners in their Indian operations regarding manufacturing and distribution. Currently, smartphone brands under the BBK Group make phones sold in India in their proprietary facilities or outsource to China-based ODMs operating in India, such as Wingtech or DBG Technology. Suppose the rumor is credible, this will be the first time BBK outsources mobile phone manufacturing to Indian partners.

According to the Ministry of Commerce of China, amid a souring bilateral relationship between China and India, China saw declining outward FDI to India in 2022, when the latest investment data is available.

Source: Ministry of Commerce of China, September 2023