Boycott calls for Chinese handsets ignore reality of India's chipset market

The essence of any handset is the chip and that's where Chinese companies enjoy an unrivalled presence

It is election time and that means the seasonal outburst of swadeshi sentiments on social media by those who want a ban on Chinese goods, a sentiment fuelled by anger, in the aftermath of Pulwama, over China’s status as Pakistan's trusted ally. 

The Confederation of All India Traders (CAIT), a leading traders’ body, called for a boycott of Chinese goods and held a burning 'Holi' of Chinese goods all over the country on March 19. CAIT President B C Bhartia and Secretary Praveen Khandelwal urged the government to impose a 300 to 500 per cent customs duty on Chinese goods.

Mobile handsets are the target of this organisation and of social media warriors. The problem is that the chipsets, the very heart of any handset, continue to be dominated by Chinese players or companies with close links to China.  

While it might be feasible to switch from Chinese brands to local ones, when it comes to handsets, the lack of any local player in the chipset market makes it nearly impossible for swadeshi lovers to be effective in spurning China’s influence.

Take Qualcomm. The largest chipset player in India, with over 42 per cent of the smartphone market, it has China’s Semiconductor Manufacturing International Corporation (SMIC) as a major contract manufacturer for its flagship Snapdragon processors.  

Snapdragon processors are widely used in mid-segment smartphones. They are priced between Rs 10,000 and Rs 25,000. As to smartphones priced over Rs 25,000, these processors have a near monopoly. From the country’s largest smartphone brand - Xiaomi's top selling Redmi phones — to challenger Samsung’s popular J and On series handsets — made-in-China Snapdragon chipsets are crucial for all major brands and consumers.

SMIC, however, does not manufacture all its chipsets. Qualcomm works with different fab partners including Taiwan Semiconductor Manufacturing Company (TSMC) and Samsung along with SMIC.  According to a company official, Qualcomm's recent flagship processors for the last two years have been with both Samsung and TSMC respectively. "The decision to choose a fab partner is taken closer to any platform launch", he said.

The second largest player in the chipset market, MediaTek, is headquartered in China's neighbour Taiwan but it enjoys a close association with Chinese investors and designers. In fact, while MediaTek remains under the control of Taiwanese investors, talks have been on over the past few years to open it up to Chinese investments. 

While a hostile takeover bid by China’s state-controlled Tsinghua Unigroup has been avoided in recent years, it has only been possible because of Taiwanese government intervention. Moreover, MediaTek entered into collaboration with China Mobile last year to develop 5G-enabled mobile chipsets faster.  Data from local analyst firm TechArc shows that MediaTek holds 38.6 percent, behind Qualcomm, in India’s smartphone market and also has a dominant presence in base-level smartphones costing between Rs 5,000 and Rs 10,000. 

Finally, chipset maker Unisoc (earlier known as Spreadtrum), which has more than a 10 per cent share of the local smartphone market, is also a Chinese fabless semi-conductor firm headquartered in Shanghai. 

TechArc estimates suggest that while Unisoc processors are not widely used in pricier handsets, they are to be found in entry-level smartphones mostly priced below Rs 5,000.

Executives from several key smartphone players said the dominance of foreign chipset makers is not surprising given the absence of any major Indian manufacturer. “Setting up a chipset manufacturing facility requires huge investment and expertise. That’s what these chipset specialists bring onboard,” said Faisal Kawoosa, chief analyst, TechArc.

A delegation of government officials and executives from the handset industry visited Taiwan and Vietnam two years ago. The sole purpose of the trip, initiated by the Ministry of Electronics and Information Technology, was to gain expertise in R&D and the designing of handsets and components. Any accompanying commitment from local industry towards the establishment of any such facility is still awaited.