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India may push Oppo, Vivo to stop operating through their Chinese distribution partners

India is tightening its grip on Chinese players on mobile devices and intends to push smartphone manufacturers like Oppo and Vivo to stop working through their Chinese distribution partners and use local companies instead, industry leaders familiar with the development said.

Leading smartphone manufacturers Oppo and Vivo, which control over 10% and over 15% of the market respectively and are traditionally strong offline players, have recently created a layer of Chinese partners to distribute their products in the market, which has caught the attention of Indian officials.

Since there is no legal framework yet to prohibit such transactions, the government is likely to inform brands of its position informally. This is when developing a legal framework, which may include a clause on working with distribution companies belonging to countries bordering India.

Oppo and Vivo did not respond to inquiries via email.

“The initial strategy would be to tackle the problem without any regulation, but legal notice could be issued if necessary,” the source said, asking not to be named.

“The general consensus is that there should be no Chinese distributor in India as they already have access to the market. The proliferation of technology products is where India already has strengths and will soon be brought to the attention of Chinese companies,” the person added.

The two smartphone brands owned by BBK Electronics have appointed state-level Chinese-origin distributors who in turn deal with smaller tier 2 and 3 distributors.

“This has been happening for a while. However, issues related to the India-China border have led to scrutiny of Chinese brands,” said the second industry leader.

He added that having Chinese distributors does not add or create value to the Indian mobile phone ecosystem. “Money earned by Indian distributors can stay within borders. Indians have experience as this is an old established ecosystem that larger players have built for brands like Samsung, Nokia and LG.”

There are usually 3-4 large state-level distributors in each region. Notably, most of the promoters of Indian mobile phone brands such as Lava, Micromax and Karbonn used to work as distributors before launching their own brands.

Currently HCL, Jaina Group, Optiemus, Ingram Micro, Syska, UTL Group, VRP Telematics are some of the well-known ICT and mobile phone distributors in the ecosystem.

A third executive who worked with a major distributor said Chinese brands were able to take control of all distribution in India. “The goal was to dictate market forces and control second and third tier distributors. Chinese distributors arbitrarily change margins for smaller distributors who are too small to raise questions.”

The development comes amid closer scrutiny by smartphone makers, with New Delhi studying regulations mandating mobile phone dismantling or in-depth testing to ensure that devices and installed apps are not tracking Indians.

While the regulation will apply to the entire industry, the focus will be on Chinese brands, experts said. In fact, the Department of Electronics and Information Technology (Meity) recently issued notices for brands such as Xiaomi, Oppo, Vivo, Realme and OnePlus asking for information on product components, also known as Bill of Materials (BoM).

The move, seen as retaliation for ongoing Chinese aggression on the India-China border, may match what the government has put in place with regard to telecommunications equipment, they said. The government compiles a list of trusted sources and trusted companies for telecommunications equipment and network products to verify alleged cyber tracking. The move is believed to be aimed at keeping Chinese players like Huawei and ZTE away from critical sections of telecommunications networks, experts said. Now You Read

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