Chinese smartphone brands revive investments in India as Delhi-Beijing ties improve

Chinese Smartphone

Chinese handset brands are reviving investments in India and seeking to mend ties with offline retailers after being accused of anti-competitive practices such as favouring online sales channels. This shift comes amid a gradual ease in India-China relations.

Brands like OnePlus, Xiaomi-owned Poco, and Realme are firming up their offline retail presence by opening stores and investing in existing outlets in the country. Conversely, Vivo is forming a joint venture with Noida-headquartered Dixon to make smartphones in its facilities.

Executives at Chinese brands have noted a more favourable sentiment following India and China’s decision to reduce military deployments along the Ladakh border. Chinese companies had previously scaled back their investments in India due to heightened scrutiny since 2020 over allegations of money laundering and tax evasion.

Premium smartphone brand OnePlus has committed Rs 6,000 crore over the next three years as part of its ambitious Project Starlight. The investment aims to bolster research and development (R&D), expand retail operations, enhance manufacturing quality control, and elevate customer service standards.

“The new investment cycle has begun, encompassing local market expansion, R&D, product development, and quality control in India. The Rs 6,000-crore investment adds to the Rs 1,000 crore we had previously pumped into our Hyderabad R&D centre. A significant portion of this investment will focus on product development,” newly appointed India CEO Robin Liu told Moneycontrol about OnePlus.

The brand looks at new stores and upgrade the existing outlets under the investment plan. “We are working to open additional stores under the new investment plan. Our priority is to enhance the in-store experience, aligning it with the premium OnePlus brand. By 2025, at least 50 percent of our experience stores will be upgraded to match our premium standards,” he said.

Realme, the fifth-largest smartphone brand, is also planning significant investments for the Indian market to support its 2025 expansion, which includes bolstering offline retail presence by opening new retail and experience stores.

Without sharing specifics, Chase Xu, the global chief marketing officer at Realme, told Moneycontrol the company has allocated an “enormous budget” for the Indian market to support its 2025 expansion. “We are yet to finalise the exact figure, but it will be a substantial amount… We want more visibility on the streets by expanding our offline focus. Our sales target of an 18 percent market share applies to both online and offline channels combined. Both the channels are equally important to us,” he said.

Xu said Realme’s Number series of smartphones will focus on the offline channel to ensure parity. At the same time, the high-end GT series will also be available across both online and offline channels.

These comments follow allegations from mobile retailers that Chinese brands are engaged in anti-competitive practices, such as prioritising online sales channels. In October, the India Mobile Retailers Association (AMIRA), representing over 1.5 million mobile retailers, sought the intervention of Commerce and Industry Minister Piyush Goyal and Finance Minister Nirmala Sitharaman.

OnePlus’s Liu said he has been in touch with offline retail or mainline retail representative bodies, such as AIMRA and ORA representatives, to address their concerns. “The discussions were fruitful, and we’ve made significant progress. Before Diwali, we managed to recover some business with ORA retailers. We acknowledge the historical challenges with these partners, but everything is now on track to be resolved.

Xiaomi-owned smartphone brand Poco faced allegations from offline retailers, including The South Indian Organised Retailers Association that the brand was avoiding the supply of phones to mainline channels. Retailers subsequently sought the central government's intervention in the brand's business practices.

“There were requests from retailers and huge demand from the offline last year due to the growth we saw in our operations. A lot of offline dealers were demanding Poco. We have gone through offline distribution from the JioMart distribution channel. We are already the fastest growing offline brand as per GFK,” Poco India head Himanshu Tandon told Moneycontrol. “2024 was a transition phase for Poco as it opened its offline channel. We are available in all multi-brand outlets. We are focusing on the top 100 cities for now. We expect 35 percent sales to come from offline channel,” he added.

Since the India-China border standoff in 2020, Chinese companies have redefined their strategies in India, streamlining their operations and making their teams leaner, while exploring new business models to align with government expectations.

Moneycontrol reported on April 8, 2024 that Chinese companies are considering joint ventures with Indian firms, often operating with minority stakes, a model encouraged by the government during the standoff. Since then, China’s Transsion and Vivo have formed joint manufacturing ventures with Dixon.

The strategic shift highlights how these companies have adapted to changing geopolitical and market dynamics, ensuring their continued relevance and competitiveness in one of the world's largest consumer markets.

Despite an initial dip in market share following the standoff, Chinese brands have regained their footing in the Indian market.

Their competitive pricing and cutting-edge technologies and features have helped them maintain a stronghold. According to Counterpoint Research, the collective market share of Chinese brands, which fell to 67 percent in Q4 2020, rebounded to approximately 75 percent in the July-September quarter of 2024—matching pre-standoff levels from 2019.

Tarun Pathak, research director at Counterpoint, said as relation started improving between India and China, there is a growing reflection of this in the facilitation of business visas for Chinese nationals. “There is a dependency on China, which is likely to remain in certain areas such as electronics because it is practically impossible to decouple China from the supply chain. So, these things are being realized. India also has a strong policy in this sector, and both countries have now realised the advantages of cooperation. However, a stable India-China relationship will still depend a lot on the border issues and navigating differences regarding economic and trade relationships,” he added.

Analysts note that Chinese smartphone companies are now focusing on penetrating the premium segment, which offers higher profit margins and boosts overall profitability.

Brands like Xiaomi, Oppo, and Vivo have introduced premium models to challenge established players like Samsung and Apple in India. Experts observe that these Chinese brands are gaining traction in the premium and ultra-premium smartphone categories, building on their strong acceptance in the entry-level to mid-premium segments.