Is Huawei at a ‘Competitive Disadvantage’ in India?

Is a non-level playing field placing Chinese telecom equipment maker’s India arm, Huawei India, at a competitive disadvantage against South Korean major, Samsung?

If Huawei India’s CEO Jay Chen is to be believed, this is happening because of the Free Trade Agreement (FTA) between India and South Korea. Recently, Chen told Business Standard that “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.”

Huawei, which is the world’s second largest smartphone seller after Samsung, controls about 30% of the 4G telecom equipment market in India in terms of value.

Chen’s comments come at a time when there is a debate over the sale of Huawei’s 5G equipment in India and several other countries, such as the US, the UK, Japan, New Zealand and Australia, after the US flagged security concerns. However, reports suggest that Huawei is more likely to sell its 5G gear in India.

Also Read : Huawei 5G Controversy: India’s Telecom Service Providers Vs Equipment Manufacturers

The main concern being raised is that Huawei might allow the Chinese government to snoop information through its equipment, something which Huawei has denied time and again.

As per the India-Korea Comprehensive Economic Partnership Agreement, South Korean manufacturers are exempted from paying import duty on telecom equipment shipped to India as long as they have a value addition of 35% in their country. As India has a similar agreement with Vietnam, Samsung again benefits, as it imports some of its telecom gear to India from its manufacturing units in Vietnam.

India has recently revised  import duty on telecom products, increasing customs duty to 20% from 10%. A 10% customs duty has also been slapped on a host of telecom products, such as printed circuit boards that earlier enjoyed zero duty.  While these measures are expected to burden telecom equipment manufacturers by Rs 6,000 crore a year, Samsung is benefitting in its competition with its rivals in India’s market. 

Also Read : India May Allow Huawei To Sell 5G Equipment

The debate raised its head again when Huawei India recently confirmed that it would conduct 5G trial runs from January next year in India, as per directions from the Department of Telecom (DoT), Government of India.

Recently, two organisations from the telecom sector – Cellular Operators Association of India (COAI) and Telecom Equipment and Services Export Promotion Council (TEPC) have written separately to the government, with the latter asking for  “ban” on Huawei gear and the former defending Huawei.  While COAI requested the DoT not to “arbitrarily” ban Huawei’s 5G gear in India, TEPC, telecom equipment manufacturers’ group, has urged the National Security Advisor Ajit Doval to ban Huawei equipment over “national interest” concerns.

Reportedly, Huawei has already secured 26 5G contracts across the world.