India to ban Chinese smartphone makers from selling cheaper devices

In order to kickstart its faltering domestic industry, a blow to brands like Xiaomi Corp. is being dealt a blow to Chinese phone makers from selling devices cheaper than 12,000 rupees $150.

According to people familiar with the matter, the move is intended to push Chinese giants out of the lower segment of the world's second biggest mobile market. They said that it coincides with mounting concern about high-volume brands such as Realme and Transsion that local manufacturers are undercutting, and they asked not to be identified as discussing a sensitive matter.

Exclusion from India's entry-level market would hurt Xiaomi and its peers, which in recent years have increasingly relied on India to drive growth while their home market suffers from a series of Covid 19 lockdowns that crippled consumption. A smartphone under $150 contributed to a third of India's sales volume for the quarter through June 2022, with Chinese companies accounting for up to 80% of the shipments, according to market tracker Counterpoint.

Xiaomi s shares extended losses in the final minutes of trading in Hong Kong on Monday. It fell by 3.6%, extending their decline this year to more than 35%. It's not clear whether Prime Minister Narendra Modi will make any policies or use informal channels to convey its preference to Chinese companies, the people said.

New Delhi has already subject Chinese firms operating in the country, such as Xiaomi and Oppo and Vivo, to scrutiny of their finances, which has led to tax demands and money laundering allegations. The government has previously used unofficial means to ban Huawei Technologies Co. and ZTE Corp. telecom equipment. Wireless carriers are encouraged to purchase alternatives as there is no official policy banning Chinese networking gear.

The move shouldn't affect Apple or Samsung Electronics Co., which price their phones higher. Representatives from Xiaomi, Realme and Transsion didn't respond to requests for comment. India's technology ministry didn't respond to Bloomberg News inquiries.

Read more: India accuses Chinese phone maker of tax fraud as probes grow as a result of the Chinese phone company's misdemeanor.

India stepped up pressure on Chinese firms in the summer of 2020 after more than a dozen Indian soldiers died in a clash between the two nuclear-armed neighbors on a disputed Himalayan border. It has since banned more than 300 apps, including Tencent Holdings Ltd.'s WeChat and ByteDance Ltd. s TikTok, as relations between the two countries are fray.

Before new entrants from the neighboring country disrupted the market with cheap and feature-rich devices, Lava and MicroMax comprised just over half of India's smartphone sales.

The Chinese smartphone players now sell the vast majority of devices in India, but their market dominance has not been based on free and fair competition, India s junior tech minister told Business Standard last week. Recurring annual losses posted by most Chinese handset manufacturers in India, despite their leading position, add to criticism of unfair competition.

In private, the government continues to ask Chinese executives to build local supply chains, distribution networks and export from India, suggesting New Delhi still wants their investment, the people said.

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