China's BBK connects with Indian companies for phone production

China’s largest mobile phone maker, BBK Group, is starting production of its Oppo, Vivo and Realme smartphones in partnership with Indian manufacturers Dixon Technologies and Karbonn Group, said people with knowledge of the matter. This is partly owing to pressure from the government to get local partners and benefit from the production-linked incentive (PLI) scheme for phone manufacturing, they said.

The move comes despite Oppo and Vivo having a large smartphone plant each in India. These make the entire range of BBK Group brands, such as Oppo, Vivo, Realme, OnePlus and iQoo. Industry executives said Chinese smartphone companies are cautious about directly investing in their own plants for capacity expansion after increased scrutiny in the last few years, ranging from alleged customs duty and income tax evasion to money laundering. The ir bank accounts had also been frozen, forcing them to take legal recourse to ensure business continuity. Investigations are

ongoing. Chinese companies came under pressure in India following the escalation in border tensions a few years ago. Two industry executives said Vivo and Realme recently began manufacturing a few handsets through a plant owned by Karbonn. Dixon is in the final stages of signing with Oppo and Vivo for contract manufacturing, according to them. As of now, monthly production capacity for Vivo and Realme in the Karbonn plant is around one million units, while the Dixon production will be lower to begin with, they said.

Since Oppo and Vivo did not apply for PLI benefits, partnering contract manufacturers that have done so already will help them become competitive, especially since competitor Samsung is a PLI beneficiary, an executive said. Oppo, Vivo, Realme, Karbonn and Dixon didn’t respond to queries.

The Centre has been nudging Chinese mobile phone companies to partner locally for production and distribution, and also appoint Indian executives in senior management roles, as ET reported last year. The government wants companies from that country to undertake more value addition in India, including the local manufacture of components.

Dixon managing director Atul Lall told investors last month that the company is in the final stages of talks with two large global mobile phone brands. “Production should commence in the next couple of months for one of the largest global brands,” which it’s signed with, he had said. “And for another customer, which is again one of the largest global brands, it should commence within the next four to six months.”

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Dixon expects “very decent volumes” from these two new customers, Lall had said in the December quarter earnings call. One of the brands is among the top three or four in India, and the other “is a very, very large global brand. And that requires certain specialised lines,” he had said.

Dixon already makes smartphones for Samsung, Motorola and Xiaomi. Samsung was the largest smartphone brand in the country in calendar 2023, with 18% share, according to market researcher Counterpoint Technology, followed by Vivo (17%), Xiaomi (16.5%), Realme (12%) and Oppo (10.5%). Chinese brands together had a 74% share in the smartphone market in 2023, up from 72% in 2019, according to Counterpoint, with no impact of the anti-Chinese rhetoric on their business.

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