Factories offer foundation for growth in massive market
Chinese smartphone makers have been increasing their investments in India as they race to establish factories in a huge and growing market where they have enjoyed sales success in recent years.
Oppo Electronics Corp has become the latest Chinese smartphone maker to invest in manufacturing operations in India, joining Vivo Electronics Corp, Huawei Technologies Co and Xiaomi Inc in efforts that experts said are aimed at expanding business in India and beyond.
Oppo received approval to set up a manufacturing unit in the Greater Noida area in the Indian state of Uttar Pradesh, the Press Trust of India (PTI) news agency reported on Sunday.
The project, which is estimated to cost 22 billion rupees (1.4 million), was granted environmental clearance from India's Union Environment Ministry with certain conditions that Oppo must follow, PTI said, citing a government official.
It was not immediately clear when construction would start, but Oppo had previously told officials in Noida that it would start production in December 2017, Indian news outlet Economic Times reported on March 5.
The state government in Uttar Pradesh waived stamp duty of 97 million rupees for the Oppo project, the Economic Times said.
Wang Yanhui, head of the Shanghai-based Mobile China Alliance, said that more Chinese companies have been investing heavily in India due to policy support and tax breaks offered by the Indian government.
"The Indian government has really made the country quite attractive to foreign manufacturing companies such as Oppo because the government is offering many favorable policies for foreign investment under its 'Make in India' initiative," Wang told the Global Times on Tuesday.
Vivo inaugurated its first manufacturing unit in Noida in December 2015, Huawei opened a factory in Chennai in October 2016 and Xiaomi set up two manufacturing facilities in Sri City, Andhra Pradesh, according to media reports.
These investments have been prompted by Indian government support as well as the companies' cost-cutting strategies, noted Liu Dingding, a Beijing-based independent technology analyst.
"Because of rising costs in the Chinese market, it has become a core strategy for Chinese manufacturing companies to move their production overseas," Liu told the Global Times on Wednesday, adding that policy support from the Indian government was the key factor in the companies' decisions.
Experts also noted that these Chinese smartphone manufacturers really had no choice but to set up factories in India because otherwise, they would be subject to 35 percent to 40 percent value-added taxes on imported devices.
"Chinese brands have been very successful in the Indian market, so it makes a lot of sense for them to have their production facilities close to their customers," Wang said, adding that these moves would give them a solid base to make gains in a market that offers huge growth potential given its massive population.
Chinese brands such as Xiaomi, Vivo and Oppo have been increasing their shares in the Indian market in the past couple of years. In the third quarter of 2017, Xiaomi caught up with South Korea's Samsung to become the top smartphone brand in India, with the two tied at 23.5 percent market shares, according to a report from market research firm IDC on November 14.
China's Lenovo, Vivo and Oppo had 9 percent, 8.5 percent and 7.9 percent, respectively, the report showed.
Experts said that having factories in India would give the Chinese phone manufacturers a way to expand in India itself as well as other foreign markets.
"India has become a key market for Chinese companies to invest in for their larger global ambitions. With the huge size of the Indian market, and its complex business environment yet supportive system ... Chinese firms could gain experience and move on to larger markets overseas," Wang said.