Chinese tech giants Xiaomi and Oppo in talks to manufacture phones in India for export
Three of China’s biggest smartphone brands have started talks with Indian manufacturers to locally produce phones for global export, a concrete step towards positioning the country as a hub for electronics manufacturing.
Xiaomi, Oppo and Vivo are in talks with Indian contract phone makers, hoping to take advantage of the cash incentives readily available to local companies, people familiar with the matter said. If they go ahead, the plan is to have Lava International and Dixon Technologies assemble the phones and export them from their factories as early as this year, they said, declining to be named in sensitive negotiations.
Such a tie-up would be a milestone for an industry increasingly dominated by Chinese brands. China is both the world’s largest consumer and producer of smartphones, but Xiaomi and its peers are looking for ways to expand globally as their home market flattens. Oppo and Vivo have opened talks with Lava, while Xiaomi is courting Dixon, the sources said.
Both groups have eyed government subsidies tied to production capacity, a program aimed at making India more competitive as an electronics maker. Chinese executives are expected to visit Lava and Dixon factories once Covid travel restrictions are lifted, one person said.
Representatives for Lava, Dixon, Xiaomi and Oppo did not respond to requests for comment. A Vivo spokesperson pointed to previous statements about the phone maker aiming to export from India by the end of 2022.
The government has long pressured overseas brands to increase their exports in exchange for access to India, the world’s fastest-growing smartphone market. More broadly, manufacturers worldwide are exploring ways to reduce their reliance on a China-centric supply chain after a bitter trade war with the U.S. and pandemic-driven shipping curbs.
India and Southeast Asia are developing into an alternative.
“India is taking full advantage of the US-China, and now China-Taiwan, cold technology war to strategically ramp up electronics manufacturing,” said Priya Joseph, policy analyst at research firm Counterpoint. “After phone makers in India started producing for the domestic market, the government is preparing the ground for the next level of the battle in phone exports.”
India’s mobile exports have surged since the government introduced the Production-Linked Incentive (PLI) program in 2020. According to the India Cellular & Electronics Association, mobile exports are expected to cross Rs 450 billion ($5.9 billion) in the year ending March, a 30-fold increase in five years.
“We see a further 10x growth by 2026, driven by the key pillars of Apple and Samsung’s global value chain ecosystem, as well as large domestic companies like Lava,” said Pankaj Mohindroo, president of the association. “India will reach around $60 billion (approximately Rs. 458,628 crore) in exports by 2026.”
Since its launch in mid-2020, several big names have signed up for the government stimulus program. At the time, the program was expected to help create $150 billion (approximately Rs. 11,180.8 billion) in mobile phone production over a period of five to six years.
Apple’s major suppliers Foxconn, Wistron and Pegatron were among the first to commit, along with Lava and Dixon. The government has since expanded similar incentive plans to a variety of electronics, from laptops to semiconductors.
While Delhi has banned Chinese apps and services, from TikTok to games, the government welcomes foreign manufacturers that can realise their longer-term ambitions.
India has emerged as the world’s second largest mobile phone manufacturer in terms of volume. More than 200 units are producing mobile phones, compared to just 2 units in 2014. The production has increased from 6 Cr mobile phones in 2014-15 to around 30 Cr mobile phones in 2020-21.Gr8
— Amitabh Kant (@amitabhk87) January 30, 2022
Xiaomi, Oppo and Vivo have started shifting capacity to India in recent years, helping the country become the world’s second-largest handset maker and assembler by volume. A few hundred factories now produce both basic phones and smartphones, up from just two in 2014, said Amitabh Kant, CEO of the government think tank Niti Aayog.
Most of these are phones that remain in the sub-Rs. 10,000 price bracket. Some of the largest domestic contract phone makers are already exporting India-made devices. For example, Lava exports to the US and Africa, while Dixon makes Motorola phones for the US market.
© 2022 Bloomberg LP
