Chinese consumer electronics manufacturer Oppo is facing mounting pressure to secure an Indian partner to make smartphones locally, as it remains one of the last Chinese handset makers without a domestic manufacturing tie-up, Moneycontrol learns from sources who did not wish to be named.
Oppo has been in talks with several Indian Electronics Manufacturing Services (EMS) players for a Dixon/Vivo-like manufacturing partnership, but it is yet to make a final decision even as the government informally urged the company to expedite the process, sources further said.
The handset makers has begun outsourcing the production of some of its smartphones through the Greater Noida factory of the Bhagwati-Huaqin joint venture, which Vivo previously operated, it is learnt. The JV is also producing phones for Vivo from the same factory. While it may be the first step towards bringing in an Indian partner to make smartphones locally, Oppo is said to be looking for a more significant deal in India.
Oppo, the largest smartphone manufacturer in India, previously was in talks with Micromax’s associate company Bhagwati Products, as well as Dixon Technologies and Lava International. The Chinese phone maker is reportedly negotiating with Tata Electronics for a Dixon/Vivo-like manufacturing partnership.
Any potential deal with Oppo may impact Tata Electronics' scale-up plans for Apple, said sources, as Tatas are now a key partner for the iPhone maker after acquiring Wistron and Pegatron’s India operations.
“While Oppo continues to look for partners, a partnership with Tata Electronics might face challenges as Apple may have reservations. Ultimately, they will have to do a domestic partnership because of government pressure. There could be an announcement for the Oppo manufacturing facility in the coming months,” a source familiar with Oppo’s plans told Moneycontrol.
Previously, a similar deal between Tata and Vivo fell through over valuations and concerns raised by Apple Inc.
While Bhagwati didn't respond to Moneycontrol's queries, a source confirmed the production of Oppo smartphones at the erstwhile Vivo factory, which was acquired by the Bhagwati-Huaqin joint venture. “The factory is operational, and production is continuing. Smartphones for both Oppo and Vivo are being manufactured at this factory. Oppo was added as a customer after securing approvals for the Bhagwati-Huaqin joint venture," he added.
Queries sent to Oppo, Tata Electronics and Dixon didn't elicit any response.
Despite having some models made at the old Vivo factory, now owned by the Bhagwati-Huaqin JV, Oppo still produces devices for its own brand and sub-brands, OnePlus and Realme, at its Greater Noida manufacturing facility, which began operations in 2016.
Realme, which started as a sub-brand of Oppo and now operates independently, gets its smartphones manufactured through Oppo and Dixon.
The Indian government has repeatedly encouraged Chinese phone manufacturers to involve Indian partners in their local operations and appoint Indian executives to key leadership positions. The objective is for the Indian partner to hold at least a 51 percent stake in any potential joint venture, ensuring significant domestic influence in the mobile phone industry, which Chinese brands largely dominate.
Following the government’s push, Chinese companies Vivo and Transsion Group had announced separate manufacturing joint ventures with Noida-headquartered contract manufacturing company Dixon Technologies (India).
Vivo, India’s top smartphone brand, had announced a joint venture in which Dixon is proposed hold a 51% stake, while the remaining share will be with the Chinese brand. The entity that will house the JV will function as an original equipment manufacturer (OEM), like Dixon, and produce electronic devices, including smartphones. The joint venture is still awaiting the government’s final clearances under Press Note 3.
“The government is monitoring how Chinese brands collaborate with Indian companies to develop the manufacturing ecosystem. We need to understand how the Chinese industry developed. Chinese companies started manufacturing for global brands, learned techniques, understood the technology, and became powerhouses. A similar benefit should accrue to the Indian industry,” a senior government official told Moneycontrol.
The government official added that Chinese companies should follow Apple’s approach to developing the local manufacturing ecosystem with Indian EMS partners.
“Apple is a clear example of how a company should help the local ecosystem grow. They started with only Taiwanese companies, namely Foxconn, Pegatron, and Wistron. Now, Wistron and Pegatron have been taken over by Tata Electronics. With such partnerships, Indian companies will hopefully grow, learn, and become part of the global supply chain. That is the expectation,” the government official added.
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