India is looking to oust Chinese smartphone makers from the sub-$150 phone market

India is trying to stop Chinese smartphone makers from selling devices cheaper than 12,000 rupees ($150) to revive its faltering domestic industry, dealing a blow to brands such as Xiaomi Corp.

The move is aimed at taking the Chinese giants out of the bottom segment of the world’s second-largest cellphone market, according to people familiar with the matter. This coincides with growing concern about high-volume brands such as Realme and Transsion undermining local manufacturers, they said, asking not to be identified discussing a sensitive topic.

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Shutting out India’s entry-level market would hurt Xiaomi and its peers, which in recent years have increasingly looked to India to drive growth as their home market suffers a series of setbacks. COVID-19 lockdowns that crippled consumption. Smartphones under $150 accounted for a third of India’s sales volume in the quarter to June 2022, with Chinese companies accounting for up to 80% of those shipments, according to market tracker Counterpoint.

Shares in Xiaomi extended losses in the final minutes of trading in Hong Kong on Monday. It fell 3.6%, extending their decline this year to more than 35%. It is unclear whether Prime Minister Narendra Modi’s government will announce policies or use informal channels to convey its preference for Chinese companies, the people said.

New Delhi has previously subjected Chinese companies operating in the country, such as Xiaomi and rivals Oppo and Vivo, to an investigation into their finances, leading to tax demands and allegations of money laundering. The government has already used unofficial means to ban telecommunications equipment from Huawei Technologies Co. and ZTE Corp. Although there is no official policy banning Chinese network equipment, mobile operators are encouraged to purchase alternatives.

This decision should not affect Apple Inc. or Samsung Electronics Co., which charges a higher price for their phones. Representatives for Xiaomi, Realme and Transsion did not respond to requests for comment.

Spokespeople for India’s Ministry of Technology also did not respond to inquiries from Bloomberg News.

India stepped up pressure on Chinese companies in the summer of 2020 after more than a dozen Indian soldiers were killed following a clash between the two nuclear-armed neighbors on the disputed Himalayan border with India. It has since banned more than 300 apps, including WeChat from Tencent Holdings Ltd. and ByteDance Ltd.’s TikTok, as relations between the two countries fray.

Homegrown companies like Lava and MicroMax accounted for just under half of India’s smartphone sales before new entrants from the neighboring country disrupted the market with low-cost, feature-rich devices.

Chinese smartphone players now sell the vast majority of devices in India, but their market dominance has not been “based on free and fair competition”, India’s technology minister told the Business Standard newspaper last week.

Recurring annual losses recorded by most Chinese handset manufacturers in India, despite their leading position, add to the criticism of unfair competition.

Privately, the government continues to ask Chinese leaders to build local supply chains, distribution networks and exports from India, suggesting New Delhi remains very keen on their investment, the people said.

Read more: India tells Chinese minister that border liberalization is key to improving relations: Reports

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