Centre May Push Smartphone Makers Like Oppo and Vivo To Quit Distributing Products Through Chinese Partners

India reportedly is boosting its inspection of China-based smartphone players. It is preparing to pressure the manufacturers such as Oppo and Vivo to stop relying on Chinese partners and instead use local firms for product distribution, as per the recent report.

Oppo and Vivo have a market share of over 10 per cent and 15 per cent, respectively. These top smartphone manufacturers, usually strong offline players, have recently developed a layer of Chinese partners to sell their products in the market, which has piqued the interest of Indian regulators.

Since, at present, there is no legislative framework in place to prohibit such operations, the government is likely to discuss its views to the brands informally.

This would be done while drafting a legal framework, which may contain a section about dealing with distribution businesses from nations that share India's borders, reported Economic Times.

According to an anonymous industry executive who spoke to Economic Times, the government’s initial goal would be to resolve the situation without enacting any regulations, but if necessary, an official notification might be issued.

“The consensus is that there should be no Chinese distribution in India since they already have market access. Distribution of tech products is where India already has strength, a point which will be conveyed to Chinese companies soon,” the executive added.

These smartphone brands, controlled by BBK Electronics, a Guangzhou-based multinational conglomerate—have selected state-level Chinese origin distributors, who then deal with smaller tier two and three distributors.

As per another industry executive, “This has been happening for some time. However, the Indo-Chinese border issues have resulted in deep scrutiny of Chinese brands.” He went on to say that having Chinese distributors adds no value to the Indian handset ecosystem.

Additionally, the executive said: “Money earned by Indian distributors can stay within the borders. Indians have the expertise since it’s an old established ecosystem which larger players created for brands like Samsung, Nokia and LG.”

At the state level, most regions have three to four large distributors. Most Indian handset brand promoters, including Lava, Micromax, and Karbonn, used to work as distributors before starting their own brands.

HCL, Jaina Group, Optiemus, Ingram Micro, Syska, UTL Group and VRP Telematics are some of the industry's most well-known ICT and handset wholesalers.

However, Chinese brands have been able to gain control over the entire distribution in India, according to a third executive working with a significant supplier. He explained that the goal was to control tier two and three distributors and determine market forces.

He also noted that the distributors in China “arbitrarily change margins for smaller distributors, who are too small to raise issues”.

This latest news comes as smartphone makers face more scrutiny, with the central government considering a rule that would require deconstruction or in-depth examination of handsets to guarantee that the gadgets and installed apps are not spying on Indians.

Recently, as per a previous report, the authorities are now targeting Chinese smartphone makers with notifications asking for details on the data and components used in the devices. The companies in question are Vivo, Oppo, Xiaomi and OnePlus, who together account for more than half of the Indian smartphone market.

To prevent alleged cyber espionage, the government is also reportedly establishing a list of trusted suppliers and reputed enterprises for telecom equipment and networking devices. Experts believe the decision is intended at keeping Chinese companies like the controversial tech giant Huawei and ZTE out of crucial telecom network areas.