Exclusive: China’s ODM Huaqin Technology in advanced JV talks with India’s Bhagwati

India’s smartphone market is expected to reach 200 million units in the coming years.

Huaqin Technology, the world's largest original design manufacturer (ODM) for mobiles, tablets and laptops, is in advanced talks with domestic contract manufacturer Bhagwati Products Ltd. for a joint venture to enter the Indian market, sources told Moneycontrol.

“The JV talks have reached advanced level... which are expected to be finalised after elections,” a person privy to the discussions told Moneycontrol. “Senior Huaqin executives currently are in India for the talks and due diligence.”

Shanghai-based Huaqin has been eyeing an India entry through a joint venture as an ODM and electronics manufacturing services (EMS) player for many years, given that the country is one of the fastest-growing mobile markets.

“India’s smartphone market is growing and will reach 200 million units annually in the coming years. This offers Huaqin a big opportunity in India’s EMS space,” a second person said.

The smartphone market in India grew by 1 percent to 146 million units in 2023, according to International Data Corporation.

Moneycontrol’s queries to Bhagwati Products and Huaqin didn’t elicit any response.

The Chinese company held JV discussions with Lava International in 2022 but the plan didn’t materialise for several reasons, including an Enforcement Directorate probe for alleged money laundering.

Eye top Chinese brands

A JV with Huaqin will help Bhagwati secure business from Chinese brands such as Oppo, Vivo, and Realme, which are looking to shift a portion of their manufacturing to India under the production-linked incentive (PLI) scheme.

Bhagwati Products is a beneficiary of the PLI schemes for smartphones, IT hardware and air-conditioner components.

Bhagwati Products missed its PLI targets for mobile handsets in FY24 after it was unable to secure large orders from Chinese smartphone companies. It has two factories - in Bhiwadi in Rajasthan and in Hyderabad in Telangana - to make mobile phones and TVs. It has been manufacturing IT hardware at the facilities since 2020.

Moneycontrol reported on April 8 that Oppo and Vivo are discussing a deal with Dixon Technologies, another PLI-approved Indian contract manufacturer.

“Once they come, they will bring their component ecosystem along with them. They are a big player in the market,” the second person said, suggesting their entry would give a push to the electronics component ecosystem.

Once finalised, the joint venture may tap the opportunity in tablet and laptop manufacturing. Many multinational companies are looking to make tablets and laptops locally through PLI-approved companies.

Huaqin was the world’s top independent design house/ODM in 2023, with a 27.9 percent market share, followed by Longcheer and Wingtech with 27.3 percent and 20.6 percent, respectively, as per Counterpoint Research’s latest report.

To stay competitive in a fiercely contested market, many multinational smartphone companies opt to outsource handset design and manufacturing to IDHs/ODMs. Samsung, Xiaomi, Honor, Oppo and Vivo are among those to have outsourced parts of their portfolios.

ODM wars

Analysts said the trend is picking up in India, with companies partnering with ODM-EMS to make their smartphones available in the country.

“As premium play gets stronger… OEMs are leaving the low end to ODMs and focus on high end.... These ODMs come with deep expertise in a segment where the margin is razor thin,” Tarun Pathak, research director at Counterpoint, told Moneycontrol.

Wingtech, which works with several handset and tablet companies in India, is reducing its market presence in the country, leaving room for Huaqin and Longcheer, experts said.

Dixon Technologies' subsidiary Padget Electronics signed a pact with Longcheer Mobile India to manufacture and sell smartphones for large global brands using Longcheer's design and technology. The partnership gives Dixon access to Longcheer's customer base, which includes top Chinese smartphone brands in India.

"Globally, these two ODMs dominate the market, and in India, they want to do the same," a third person said.