(Yicai) Sept. 18 -- Chinese mobile phone manufacturers such as Xiaomi, Vivo Communication Technology, and Oppo are rethinking their investment strategies in India, prompted by falling market shares.

The strategy of mainstream Chinese mobile brands in the Indian market, including Xiaomi and Vivo, is to maintain the status quo, ensure healthy operations, and be cautious about reinvestment, Gao Shiwang, secretary general of a branch of the China Chamber of Commerce for Import and Export of Machinery and Electronic Products, said in a recent interview with Yicai.

After 10 years in India’s market, Chinese brands are seeing their market shares shrink even though they were among the most positive responders to the Indian government’'s ‘Make in India’ initiative, launched in 2014, to encourage companies to produce more locally.

The combined market share of four Chinese producers -- Xiaomi, Vivo, Oppo, and Realme -- was 55 percent in the second quarter, down from 70 percent in 2021, according to data from Canalys. Meanwhile, South Korea’s Samsung has been quick to take some of that lost ground.

Shipments of Xiaomi, Oppo, and Vivo peaked in 2018 and 2019 and reached four million units a month, but now they are around 1.5 million, according to Yang Shucheng, secretary general of the China-India-Vietnam Electronics Mobile Phone Enterprise Association. The reason behind the downturn is a contraction in the global phone market and new policies that have caused Chinese firms to cut output. 

Support and Subsidies

A Chinese industry source in India said Apple, Samsung, and local brand Reliance Jio have received support and subsidies that have weakened the competitiveness of Chinese brands, adding that their market shares are expected to fall further.

Xiaomi and Oppo have been scaling back their liquidity in India since last year, affecting their expansion strategies, according to an observer of the South Asian consumer electronics market.

But the government is not to blame for slowing demand. “Xiaomi’s decline is not due to government scrutiny,” Sanyam Chaurasia, an analyst at Canalys said to Yicai. “It is mainly due to the macro situation hitting its primary portfolio, and online channels have not shown consistent demand, and it was late in terms of being an aggressive fifth-generation wireless brand.”

India has always required Chinese companies to form local supply chains, especially for high-tech components. But trust will be hard to recover, even if Apple asked for the Indian government’s approval for more than 10 Chinese suppliers’ to open plants in India, the Chinese firms would still be very cautious about investing in India, the observer said, adding that the development of those supply chains would be slower than expected.

Staying Put

Chinese phone makers had more than 200 factories in India in 2021, and the total number of employees exceeded 200,000, according to a report. There were over 500 trading companies, with more than USD3 billion in investment. Chinese firms used to provide more than 500,000 jobs in the South Asian country.

“Oppo and Vivo bought industrial land in India, so they can hardly pull out,” the Chinese industry insider said. “They have no choice but to hold on.”

Even if India urged them to continue building, they would postpone their projects as demand is falling and their capacity is under used, according to industry insiders in China and India, with some small and mid-sized supply chain enterprises opting to leave India.

The China-India-Vietnam handset association has organized three business missions to Vietnam this year, and the latest will depart later this month, Yang said. Chinese companies will not put all their eggs in one basket, and in the next five to 10 years, their first options are Vietnam, India, Indonesia, Hungary, and Mexico, he added.

Editor: Emmi Laine