'We have apprehensions': Xiaomi says phone component cos wary of setting up base in India

China's Xiaomi has told New Delhi that smartphone component suppliers are wary of setting up operations in India amid heavy scrutiny of Chinese companies by the government.

Xiaomi, according to a Reuters report, has also urged India to consider offering manufacturing incentives and lowering import tariffs for certain smartphone components.

The Chinese company, which has the biggest share in India's smartphone market at 18%, assembles smartphones in India with mostly local components and the rest imported from China and elsewhere. 

India ramped up scrutiny of Chinese businesses after a 2020 border clash between the two countries killed at least 20 Indian soldiers and four from China, disrupting investment plans of big Chinese companies and drawing repeated protests from Beijing.

While Chinese companies operating in India are reticent to speak publicly about the scrutiny, Xiaomi, which has written a letter to the Centre, shows that they continue to struggle in India, especially in the smartphone space where many critical components come from Chinese suppliers.

In the letter, Xiaomi India President Muralikrishnan B. said India needed to work on "confidence building" measures to encourage component suppliers to setup operations locally.

"There are apprehensions among component suppliers regarding establishing operations in India, stemming from the challenges faced by companies in India, particularly from Chinese origin," Muralikrishnan said, without naming any companies.

The mobile firm also raised related to compliance and visa issues that it didn't elaborate on, and other factors. It said "the government should address these concerns and work to instil confidence among foreign component suppliers, encouraging them to set up manufacturing facilities in India."

Indian authorities last year accused Chinese smartphone company Vivo Communication Technology of breaching some visa rules and alleged it siphoned $13 billion in funds from India.

India has also frozen more than $600 million in Xiaomi assets for alleged illegal remittances to foreign entities by passing them off as royalty payments.

Both Chinese companies deny any wrongdoing.

Other than regulatory scrutiny of the likes of Xiaomi and Vivo, India has since 2020 also banned more than 300 Chinese apps, including ByteDance's TikTok, and halted planned projects such as those planned by Chinese automakers BYD and Great Wall Motor.