 "Huawei")
A non-level playing field is placing Chinese telecom gear manufacturer Huawei India at a competitive disadvantage vis-a-vis its new global rival Samsung — that’s the charge being made by Huawei India’s CEO Jay Chen.
In competing over the sale of telecom equipment in India against the South Korean major, Chen said that Huawei India had to deal with the fact that South Korea and India have a Free Trade Agreement (FTA) under which Samsung does not have to pay any customs duties on its equipment.
“Because of the FTA which India has with South Korea, companies like Samsung import telecom equipment to India with no customs duty. However, as we do not have an FTA and so have to pay duty, it puts us at a competitive disadvantage against them which leads to a non-level playing field for us in the marketplace,” said Chen. Samsung declined to comment on the charge, with sources close to the company choosing only to point out that FTAs are negotiated between governments and Samsung has no role to play in the FTA between South Korea and India.
Under the India-Korea Comprehensive Economic Partnership Agreement, South Korean manufacturers pay no import duty on telecom equipment which is shipped to India as long as they have a value addition of 35 per cent in their own country.
South Korean network and mobile radio communications equipment, base stations, switching systems, routers, modems, and digital loop carriers, among others, are all exempted from customs duty. India happens to have a similar agreement with Vietnam from where Samsung imports some of its telecom gear after having invested billions of dollars on setting up manufacturing facilities for mobile devices and telecom equipment.
The price advantage emanating from the FTA was magnified three months ago when the government decided to increase the basic customs duties on much telecom network equipment from 10 per cent to 20 per cent, primarily to protect Indian industry and encourage the ‘Make in India’ initiative. It also imposed a 10 per cent duty on printed circuit boards.
Samsung is a new player in the telecom equipment space but it has been able to make a substantial dent in the Indian market where it has won most of the contract to build and expand Reliance Jio’s 4G telecom network.
Despite the fact that, according to analysts, Huawei controls about 30 per cent of the telecom equipment market in terms of value, it is believed that Samsung is making further strides, even closing in on a deal with Reliance Jio to undertake 5G trials in the country. Across much of the world, the two giants are locked in combat to win telecom operators over to buying their 5G gear.
The huge import of 4G LTE equipment from Vietnam (estimated to have cost around $1.4 billion), has also caused heartburn among domestic Indian manufacturers of telecom equipment. These companies have, through the government-supported Telecom Equipment & Services Export Promotion Council (TEPC), conveyed their concerns to the relevant government departments.
Their gripe is that FTAs are cancelling out the very reason for which the government had increased import duties on such equipment in the first place, namely, to protect the domestic industry and encourage domestic manufacturing.
Huawei India’s complaint against Samsung comes at a time when it is facing flak across the globe from countries such as the US, UK, New Zealand and Japan over fears that its telecom equipment could be used for spying. These countries have banned or restricted the use of Huawei’s 5G equipment.
In India too, the TEPC has asked for a ban, citing risks to national security. But the Cellular Operators Association of India, which represents telecom operators, has backed Huawei.
Huawei heartburn
- Huawei, which controls about 30 per cent of the 4G telecom equipment market in India in terms of value, alleges it faces non-level playing field
- Says it is at a competitive disadvantage vis-a-vis Korean rival Samsung for sale of telecom gear
- India and South Korea have a free trade agreement under which there is no import duty on telecom equipment; Huawei, on the other hand, has to pay hefty duties
