Chinese mobile companies making more in India to dim regulatory glare

Chinese smartphone brands are increasingly outsourcing production to Indian contract manufacturers, benefitting the likes of Dixon Technologies and Bhagwati Products (Micromax), following what industry executives see as an unofficial nudge from the government.

Despite having excess capacities in their own manufacturing facilities in India, Chinese smartphone brands are outsourcing a large part of production to companies that are participants in the government’s production-linked incentive scheme, industry executives and market trackers said.

Brands are not just outsourcing volumes, but also shifting the risk of government interventions and scrutiny, they said.

They are on course to become more asset-light in India, where they face a tough regulatory environment. Offloading manufacturing — which incurs huge capital and operating expenses and has additional compliance issues — helps in cutting costs at a time when they are facing a liquidity crisis and stressed balance sheets, executives aware of the development told ET.

According to Counterpoint Research, Oppo’s shipments from its Noida factory fell 34% on-year in 2024 due to the increasing contribution of outsourced manufacturing by Dixon Technologies and Bhagwati Products.

At a recent earnings call, Dixon Technologies chief executive Atul Lall projected the sales volume in India’s smartphone market to be around 150 million a year. “Out of that 150-odd million, Android space is around 135-140 million. Various brands are manufacturing in-house. And the outsourcing opportunity is around 90 million. And including our new tie up of Vivo, we are targeting for around 60-65 million by next year,” he said.

Dixon made 28.3 million smartphones in fiscal 2025. Its projection for the ongoing fiscal year is 43-44 million.

Lall said Dixon will be manufacturing 7-8 million smartphones for Realme (an Oppo subsidiary), which will be expanded in the next few years. It will also be supplying around 15-16 million smartphones to Vivo in the January-March quarter of 2026, by when it expects to get government approvals for its joint venture with the Chinese company.

Brands such as Transsion and Vivo have also signed strategic partnerships with Dixon to form joint ventures where the volumes and revenues are split between the two partners.

“For Chinese companies, there seems to be an informal diktat from the government of India encouraging them to have some part of their volumes manufactured by Indian players. This is happening even though these companies have significant unutilised in-house manufacturing capacity,” an industry executive who did not wish to be named told ET.

Samsung, Oppo and Vivo each have around 60 million units of capacity in India, while their annual sales are around 20-25 million, market trackers said.

Emailed queries to Oppo and Bhagwati didn't elicit any response till press time Tuesday.

“Given the low margins in assembly, to have a positive unit economics you need a large scale, which is there with EMS (electronics manufacturing services) players like us. You can only achieve so much scale with making for your own brand. The trend of in-house manufacturing moving towards outsourcing, it’s primarily to deleverage their balance sheets,” Lall told ET.

Another industry executive told ET that Chinese brands are choosing to make only their high-end and flagship models in-house, outsourcing the entry-level models to Indian contract manufacturers.

“The budget segment of the smartphone market in India has not been growing for the past three-four years. In fact, it has been declining. Making these budget phones in-house is becoming less economical for the brands themselves,” the executive said.

Recently signed partnerships with Chinese ODMs (original design manufacturers) by Indian contract manufacturers are also facilitating increasing outsourcing to them.

Dixon has tied up with Longcheer, the largest Chinese ODM, and is making smartphones for Realme. Meanwhile, Bhagwati has formed a strategic joint venture with Huaqin, the second-largest ODM from China, and is churning volumes for Oppo and Vivo.

“With these ODM partnerships in place, Dixon and Bhagwati are in a stronger position to attract more outsourced manufacturing from Chinese brands who are far more comfortable working with fellow Chinese manufacturers than Indian brands,” one of the executives said.

The executive added that Indian players have supervisors from the Chinese ODMs in place to monitor the shift in production from their in-house facilities.

Indian contract manufacturers, who are beneficiaries of the PLI scheme, are also offering competitive pricing to the Chinese companies.

“A large portion of the PLI incentives, around 80% of it, are passed down to the customers, with the EMS companies keeping only a small part of it, helping customers achieve cost parity with manufacturing in places like China,” one of the executives said.