In Q2 of 2022, the shipment of smart phones in India reached 36.4 million, down 5% month on month From Canalys
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Under the multiple influences, the shipments of smart phones in India have declined for three consecutive quarters, and the local operations of China’s leading mobile phone manufacturers have also been challenged by problems such as “tax inspection”. Recently, data released by canalys, a research structure, showed that in the second quarter of 2022, Indian smartphone shipments reached 36.4 million, a decrease of 5% compared with the previous quarter.
Among the top five lists, Chinese mobile phone manufacturers accounted for 67%, but their share decreased compared with 74% in the same period last year. Xiaomi fell from 29% to 19%, and Hongmi’s local business was impacted.
Sanyam chaurasia, an analyst at canalys, said, “due to the decline in demand and the government’s review of Chinese manufacturers, manufacturer level activities remained sluggish in the second quarter. Rising inflation has reduced consumers’ disposable income, and manufacturers are also trying to make up for their operating costs.
Hold and retreat
In the past few years, Chinese mobile phone manufacturers have been an important participant in the Indian electronics market, both at the manufacturing end and at the consumer end.
According to the data released by the cellular communications association of India, in 2014, Indian made mobile phones accounted for only 3% of the world, but in 2015, the second year after Indian Prime Minister modi promoted “made in India”, Indian made mobile phones accounted for 11% of the world, and surpassed Vietnam to become the second largest mobile phone manufacturer after China. At present, most Chinese brands have rapidly changed from SKD (semi bulk assembly) to CKD (full bulk assembly) to complete localization.
The latest data from canalys shows that in the second quarter of this year, Indian smartphone shipments reached 36.4 million, while the overall shipments of Chinese mobile phone manufacturers accounted for 76%. Although Xiaomi suffered a year-on-year and month on month decline, its shipment volume still reached 7million, ranking first over Samsung. Realm, vivo and oppo ranked among the top five with shipments of 6.1 million, 6.0 million and 5.5 million units respectively.
“The depreciation of Indian currency, rising retail prices and compliance risks for Chinese brands have hindered the growth of the market segment below $200.” Sanyam chaurasia, an analyst at canalys, said that in the short term, we still need to be cautious in the face of the local economic environment.
In the view of the industry, the decline in the local share of China’s leading mobile phone brands in India comes from frequent “censorship”.
Anonymous insiders revealed that in recent years, at least 500 Chinese enterprises have encountered tax and compliance surveys in India, involving mobile phone manufacturers, equipment suppliers and infrastructure investors, mobile application suppliers, etc. This year alone, the enterprises surveyed include Huawei, Xiaomi, vivo and oppo.
Yang Shucheng, Secretary General of the Chinese funded mobile phone enterprises association of India, told reporters that the above data is not necessarily accurate, but according to the understanding with local manufacturers, this data does reach “hundreds”.
“For industries with fierce competition and low profit margins, bearing unreasonable tariffs means that profits are eroded or price competitiveness is lost.” Yang Shucheng said that previously, the frequent establishment of Chinese enterprises in India was also related to tax considerations.
Facing the current Indian market, most Chinese enterprises still take a positive attitude.
As for the raid of the enforcement director of India, vivo told reporters that as a responsible enterprise, vivo strictly abides by all local laws and regulations in India.
Facing the issue of tariff evasion raised by the Indian Ministry of finance, oppo told reporters that oppo India was reviewing the notice from the office of the tax Intelligence Agency (DRI). Oppo is a responsible enterprise and adheres to a prudent corporate governance framework. Oppo India will take necessary and appropriate measures in this regard, including any remedies provided by law.
However, some Chinese mobile phone manufacturers’ teams have withdrawn from the Indian market.
Zhao Ming, CEO of glory, previously told reporters that glory had a team in India a few years ago and operated for a long time. Later, due to well-known reasons, glory India team withdrew. “At present, glory still has partners in India and has opened related businesses. At the same time, the Indian market has maintained profitability. In the future, glory will adopt a very safe way to carry out business in the Indian market.”
Weaken the investment confidence of Chinese Enterprises
In the past few years, the tax investigation of foreign-funded enterprises by Indian government departments has been uninterrupted.
According to incomplete statistics, Indian tax authorities have conducted tax investigations and issued high fines on many foreign-funded enterprises such as shell, Nokia, IBM, Wal Mart and Cairn energy. Since 2020, India has mainly targeted Chinese enterprises.
According to the investigation direction of Chinese enterprises, Indian law enforcement departments focused on the review of “royalties”, and they claimed that relevant enterprises illegally transferred funds out of the country by “misrepresenting” royalties.
The Indian Ministry of Finance issued a statement at the beginning of this year, saying that in the investigation, it was found that Xiaomi India did not include the patent license fees and royalties paid to Qualcomm and Beijing Xiaomi mobile software company in the import value declaration, which lowered the value of the goods, in violation of India’s Customs Law. The Department has sent three notices to Xiaomi India Company requesting to pay the tax omitted between April 1st, 2017 and June 30th, 2020.
Xiaomi said that the root cause of the tax problem this time was the differences between the parties on the determination of the price of imported goods. Whether the royalties, including patent licensing fees, should be included in the price of imported goods is a complex technical problem in all countries.
“Tax differences are an industry wide problem that many enterprises are trying to solve.” The head of another mobile phone manufacturer told reporters that whether royalties, including patent licensing fees, should be included in the price of imported goods is a complex technical problem in all countries.
The India Cellular & Electronics Association wrote to the Indian government in June this year, saying that the above actions had caused “deep and unnecessary panic” in the industry. The members of the association include both Indian local enterprises and foreign-funded enterprises investing in India, including Google, apple, Amazon, Xiaomi, etc.
However, for Chinese mobile phone manufacturers, tax related hit checks are not the only challenge they face at present.
According to the materials provided by a domestic electronic enterprise to reporters, India’s income tax is governed by the national income tax law, while the value-added tax and consumption tax are governed by state laws, and the tax system is complex. At present, the most difficult thing for everyone is that the Indian government’s regulatory policies on foreign investment are complex and changeable, and it does not know how to systematically deal with these problems, which will also weaken the confidence of Chinese enterprises in local investment.
The above materials show that foreign investment into India should not only abide by the written laws of India, but also abide by the principles established in the judgments of Indian courts, which makes the rules and regulations in Indian laws extremely cumbersome, but also complex and changeable. In addition, in the past, foreign enterprises invested in India directly without the approval of the government. Second, in some specific industries, foreign enterprises need to obtain the approval of the government before investing. However, in April last year, the Indian government required all foreign investment from countries bordering India to be approved by the government in advance. In addition, in addition to investment, enterprises from India’s land neighbors also need to register with the competent authorities in advance if they want to participate in public procurement bidding.
Since the “made in India” plan was put forward in 2016, India’s relevant tariffs have been raised for many times. Taking the mobile phone industry as an example, the Indian government has increased the basic tariff of smart phones from 10% to 15% since December 2017, and then to 20% in February 2018. In April, it imposed a 10% tariff on electronic components including circuit boards and camera modules. Such a policy will undoubtedly promote the local production of upstream electronic components and complete machines of mobile phones.
“As the domestic production line is relatively perfect, the way of trade import may be more suitable for domestic mobile phone manufacturers to enter the Indian market. Generally speaking, if it is fast, the order turnover cycle from placing an order to warehousing in India is about 8 days, and the transshipment from Hong Kong, China is very convenient. However, if tariffs have been changing, including the continuous adjustment of taxes in each state (country), this will also directly affect the profits of mobile phones.” The person in charge of the above-mentioned electronic enterprises told reporters.
Previously, the news that Indian relevant departments investigated Chinese enterprises has attracted China’s attention. Zhao Lijian, spokesman of the Chinese Ministry of foreign affairs, said at a regular press conference on May 31 that the Chinese government has always required Chinese enterprises to operate legally and in compliance overseas, while firmly supporting Chinese enterprises to safeguard their legitimate rights and interests. Zhao Lijian stressed that India should act in accordance with the law and provide a fair, just and non discriminatory business environment for Chinese enterprises to invest and operate in India.
Yang Shucheng told reporters that India’s investment environment should be improved, and Chinese enterprises should also take India as the direction of long-term investment, rather than short-term behavior. India still has market investment value in the long run.
Read more from China business: canalys: in Q1 2022, the mobile phone market in Chinese Mainland shipped only 75.6 million units, which topped the list for the first time. Counterpoint research: in 2021, Q4, Apple iPhone shipped 81.5 million units, surpassing Samsung to become the world’s largest smartphone manufacturer, Russian businessperson : from February 28 to March 13, 2022, the sales of Chinese smartphones in Russia rose sharply. Canalys: in Q1 2016, Huawei’s smartphone shipments reached 19.1 million. Canalys: in Q2, the global smartphone statistical report, Apple’s smartphone market share increased by 3% against the trend. Canalys: in the second quarter of 2021, India’s smartphone shipments reached 32.49 million, down 13% month on month. Canalys: in 2021, India’s smartphone shipments reached 162 million, up 12% year-on-year. Antula: February 2022 a The flagship of ndroid mobile phones is less than 1000 yuan. Canalys: in 2021, the share of oppo mobile phones in the Mexican market was as high as 12% IDC: in 2017, the shipment of smart phones in Q3 China was 115million, a year-on-year decrease of 0.1%. It is expected that Huawei, Xiaomi The total global mobile phone shipments of OV will exceed 400million. Korea International Trade Association: half of the users of OV are young people. They change iphoneanalytics as soon as they have money: in Q2, the global smartphone market shipments fell by 9% in 2022. China Academy of information and communications: in April 2022, China’s smartphone shipments were 17.7 million, a year-on-year decrease of 34% counterpoint: in 2022, Q1 iPhone accounted for 62% of the sales in the high-end smartphone market
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