(Yicai Global) June 16 -- Chinese mobile phone manufacturers should unite to negotiate with the Indian government and decide on a course of action that will cause the least losses, an analyst said after the Indian government imposed tougher requirements on Chinese handset makers to further localize their business in the Southeast Asian country.

Chinese firms should enter into talks with the Indian government to find a way forward, instead of meekly accepting all the stipulations or quitting the market, said Chen Jing, vice president of the University of Science and Technology of China’s Technology and Strategy Research Institute.

India’s Ministry of Electronics and Information Technology has requested Chinese handset makers with a presence in the country, such as Xiaomi Corp., Oppo Mobile Telecommunications Corp., Realme and Vivo Communication Technology, to appoint Indian nationals in senior positions, such as chief executive officer, chief operating officer, chief financial officer and chief technology officer, the country’s Economic Times reported on June 13.

They have also been instructed to delegate contract manufacturing to Indian firms as well as to set up joint ventures so as to improve the level of India’s manufacturing of components to meet global standards.

The four Chinese firms, which together make up 60 percent of India’s cell phone market, have yet to respond.

A single company on its own won’t be able to withstand these requirements, therefore it is necessary for Chinese firms to unite and negotiate as a whole, said Chen.

By setting these conditions, the Indian government is not only aiming to boost the local market, but it also wants Chinese companies to help India improve its status in global supply chains, Sha Jun, co-founder of the India Investment and Services Center of Yingke Law Firm, told Yicai Global.

These demands will greatly change companies’ cost structures and even their governance structures, which will put huge pressure on these firms, Sha said.

It is the latest in a string of setbacks that Chinese cellphone makers are experiencing in the country. Just last week, Xiaomi was frozen with INR55.51 billion (USD677 million) after India’s money laundering watchdog accused it of tax evasion, and which is likely never to be returned. The Beijing-based firm has only earned INR9.46 billion (USD115.4 million) in profit in India in the past nine years.

Chinese smartphone makers have been punished multiple times in India for tax-related matters. The probes have also targeted companies in the upstream and downstream of the industrial chain. A manager at a Chinese manufacturer of mobile phone accessories based in India said to Yicai Global that he is getting tired of the scrutiny.

To walk away from the Indian market is not easy though. For instance, Ford Motor said it would quit India in 2021, however, due to labor disputes, the US car giant only reached a severance payout agreement with workers one year after the plant closed.

Editors：Xu Wei, Kim Taylor