In response to the Indian government's intensified scrutiny of Chinese companies, Xiaomi, holding an 18% market share in India's smartphone industry, has conveyed that cell phone component suppliers are wary of initiating projects in the country. Xiaomi's letter, dated February 6, also proposes that India consider offering manufacturing incentives and reduce import tariffs for specific smartphone components. The company assembles smartphones in India, primarily utilizing local components, with the remaining parts imported from China and elsewhere.

This communication comes amidst heightened scrutiny of Chinese companies in India following a 2020 border conflict. Xiaomi's letter, a response to an inquiry from India's information technology ministry, highlights the need for 'confidence-building' measures to encourage local operations by component suppliers. 

While Chinese companies operating in India tend to be cautious about openly addressing the scrutiny, Xiaomi's letter underscores the challenges faced in India's business landscape, especially in the smartphone sector where critical components are often sourced from Chinese providers. The Indian government's response to these concerns will play a pivotal role in shaping the future dynamics of Chinese investments and operations in the country.