Raids on Xiaomi and Oppo units in India - what did it achieve?

It was a strange week for Foxconn, one of the leading contract manufacturers in India. It has been shut for 5 days due to workers unrest owing to poor quality of food at its hostel. Over 150 had to be hospitalised due to food poisoning. Amidst this, it also emerged that the Foxconn unit had begun trial production of iPhone 13, with the possibility of commercial manufacture by February 2022.

Added to this, on Wednesday, government officers conducted searches at the unit in Sunguvarchatram near Sriperumbudur (close to Chennai). The Xiaomi arm --- Bharat FIH, to be precise --- functioning within the Foxconn unit was the one targeted for the raid.

But it was not Foxconn alone that was singled out for the raids. The searches were part of a nation-wide operation against the Chinese companies Oppo and Xiaomi. The officers said the raids followed “intelligence inputs” suggesting concealment of income and evasion of taxes by the companies.

The raids were conducted in over 25 cities across India, including Delhi, Mumbai, Chennai, Bengaluru, Kolkata and Guwahati.

Foxconn, for the record, apart from being a contractor for Apple devices, also does work for Xiaomi through Bharat FIH, which as it happens, has announced a Rs 5,000 crore IPO in India this week.

Xiaomi, Oppo ready to cooperate with govt

The sleuths of the anti-smuggling agency Directorate of Revenue Intelligence searched the factories of Foxconn India's unit (specifically Bharat FIH), and Dixon Technologies --- both are contract manufacturers for Xiaomi. These searches on Wednesday were followed by raids by tax inspectors at places belonging to Xiaomi and Oppo (including OnePlus) across the country.

Both Xiaomi and Oppo put out statements saying they were fully cooperating with the authorities.

National security? Or...

Though government has not officially stated anything beyond the usual 'we were following the intelligence reports', sources say that the raids did not happen overnight. "The government has been watching some of these Chinese companies closely, and the financial transactions seemed to be under a cloud," a source said. There was an Enforcement Directorate case against a company related to Oppo. Oppo's Chinese distribution partner was penalised in hundreds of crores by the ED in Hyderabad.

"The raids adhered to all the protocols to be followed during such searches," the source added, scotching suggestions linking the I-T raids to the troubled India-China relationship.

Earlier, the government reportedly had sent notices to Chinese smartphone companies, asking for details on the data and components used in the devices.

It was reported that the companies in question are Vivo, Oppo, Xiaomi and OnePlus, which together account for more than half of the Indian smartphone market.