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A Chinese invasion, albeit with a difference

By Subhayan Chakraborty
October 04, 2017 13:01 IST
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Oppo's FDI application approved for single-brand retail trading

The government has approved the foreign direct investment (FDI) applications of Chinese smartphone manufacturer Oppo and lingerie retailer Zivame, gifting brand Chumbak and two other firms.

On Tuesday, the Foreign Investment Facilitation Portal (FIFP) approved single-brand retail trading for Oppo for an unspecified amount.

The company had been one of the first to apply under the liberalised FDI norms, first updated by the government back in June 2016.


While the company had applied soon after, the government had taken a long time to finally give the nod owing to initial reservations about allowing a major Chinese retailer rights to sell in India, a senior government official hinted.

The latest move allows Oppo to sell its products both online and offline, apart from the existing wholesale retail route used by it.

Currently, the company sells its products through franchises using the distributor model.

As of June quarter, Oppo is the fourth largest player with 8 per cent share in the Indian smartphone market, according to market intelligence firm International Data Corporation.

On the investment front, current norms allow an entity to invest through the automatic route up to 49 per cent, while allowing for full investment post-government approval.

However, in cases where FDI exceeds 51 per cent, sourcing of around 30 per cent of the value of goods purchased will have to mandatorily be done from India. This will have to be preferably from micro, small and medium enterprises (MSMEs).

It is not immediately clear if Oppo would also have to abide by the local sourcing norms since the government has not released the gamut of its investments.

Mobile phone manufacturers, including American giant Apple, had earlier objected to this arguing that components can't be sourced domestically owing to the lack of manufacturers.

The Guangdong-based electronics and technology services provider has an existing assembly unit in Noida, Uttar Pradesh that began production in July 2016.

The company is looking to significantly increase capacity and is planning to build a mobile phone manufacturing facility as well.

The company plans on exporting phones made in India to other markets as well.

Actoserba Active Wholesale Ltd, which retails the Zivame brand of undergarments, has also been allowed to sell through the single brand route, apart from its existing business of wholesale.

The other FDI proposals approved by the government include those for gift brand Chumbak Design worth $8.62 million and Swedish watchmaker Daniel Wellington AB worth $10 million.

The Foreign Investment Facilitation Portal, the successor mechanism to the erstwhile Foreign Investment Promotion Board is the new online single-point interface of the government for investors.

It is being administered by the Department of Industrial Policy and Promotion (DIPP).

A senior DIPP official said the portal will continue to facilitate the clearance of applications that are yet to be approved.

Upon receipt of the FDI application, the concerned administrative ministry or department shall process the application as per the standard operation procedure (SOP).

The portal also showed that Diabu Diamond Tools India has been advised to approach the automatic route for its FDI proposal.

Oppo to set up Rs 2,200-cr smartphone manufacturing unit in Greater Noida

Smartphone maker Oppo Mobiles is planning to invest around Rs 2,200 crore in India for a mobile phone manufacturing facility. The proposed investment will be at Greater Noida.

The company has submitted documents related to the proposed project to the Environment Ministry and said that the net amount required for the establishment of the second unit in Uttar Pradesh includes land as well as development costs.

The project is expected to be a self-sufficient manufacturing establishment, spreading across an area of 110.04 acres.

In its response to a set of questions posed by the Business Standard, Oppo said its other assembly unit in Noida, which began production in July 2016, has reached full capacity and plans were being firmed up for the setting up of a Surface Mount Technology (SMT) manufacturing facility at Greater Noida in the state.

An SMT unit produces printed circuit boards of an electronic device on which various circuits are embedded that allow the basic functioning of the device.

At present, most companies, assemble phones from semi-knocked down (SKD) mobile phone modules or kits. SMT is part of the completely knocked down (CKD) phase of assembling, wherein a handset-maker imports individual components in a CKD form and assembles them in India. This takes manufacturing a step up from SKD.

In the next 2-3 years, in line with company's plan, Oppo will begin exporting phones manufactured in India to West Asia, North Africa and other South Asian markets. Currently, the products are offered restricted to Indian consumers.

T E Narasimhan in Chennai

Photograph: Beawiharta/Reuters

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Subhayan Chakraborty in New Delhi
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