China’s Xiaomi has reportedly conveyed concerns to the central government regarding the reluctance of smartphone component suppliers to establish operations in India amid heightened scrutiny of Chinese firms by the government.

What Happened: Xiaomi, holding the largest share of 18% in India’s smartphone market, also asked for manufacturing incentives and reduced import tariffs for specific smartphone components in the letter dated February 6, Reuters reported, citing sources.

Despite assembling smartphones in India with primarily local components, Xiaomi faces challenges due to the sourcing of some components from China and elsewhere.

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Lasting Tensions: Following a 2020 border clash between India and China, which led to increased scrutiny of Chinese businesses, Xiaomi’s letter underscores ongoing struggles in India’s smartphone sector, where critical components often originate from Chinese suppliers.

In the letter, Xiaomi India President Muralikrishnan B. highlighted the necessity for “confidence-building” measures to attract component suppliers to establish local operations. Concerns among suppliers stem from compliance issues and visa challenges, according to the letter, which urged the government to address these issues to foster confidence among foreign suppliers.

Tariff Plea: Xiaomi also advocated for reducing import tariffs on sub-components used in batteries, USB cables and phone covers to enhance India’s manufacturing competitiveness. However, it suggests that enticing component manufacturers to set up operations in India would necessitate more significant incentives.

In January, India hinted at a potential easing of scrutiny on Chinese investments, contingent upon peaceful border relations between the two countries.

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