Why Huawei Might Be Scaling Down Its Operations in India?

Last Updated on Aug 23, 2022 by Aradhana Gotur

Huawei is facing increased institutional roadblocks in its operations. Apart from being barred from India’s 5G trials due to concerns regarding Chinese cyber-espionage, the telecom major has faced income tax raids, the issue of a Look Out Circular (LOC) against its India CEO, increased historical audit scrutiny and investigations into the national security ramifications of its operations.

At one point in early 2021, Huawei’s leadership had stated that it will never leave India. However, faced with recent informal restrictions on collaborations with technology ecosystem players such as universities and startups, the company is planning to downsize its R&D operations in the country.

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Chinese Companies under scrutiny

As a result of the standoff on the border between Indian and Chinese armies for the past couple of years, Chinese companies in India, especially phone makers and digital lenders, are under scrutiny:

Vivo, Xiaomi, and Oppo are facing the heat for illegal transfer of money out of India, tax evasion and irregularities in imports, especially in light of dwindling market shares of Indian phone brands.
The Enforcement Directorate (ED) recently said that a number of fintech companies and NBFCs backed by Chinese funds had generated illegal proceeds worth more than Rs. 940 cr. by indulging in predatory lending activities by violating RBI guidelines.

Global boycott led by the US

In May 2019, former US President Donald Trump issued an order that banned the use of telecom equipment from foreign firms, which he saw as a national security risk.
The governments of Japan, Australia, New Zealand, and Sweden followed the US move and banned Huawei.
Later, Google ended ties with Huawei denying the firm its Android technology.
Huawei’s top executive Meng Wanzhou was caught in Canada for business dealings with Iran. She was freed in a swap deal after 3 yrs.
Regulators in various countries blocked acquisitions by Huawei of non-Chinese companies by citing national security concerns.

Company’s origin concerns

The company’s founder, Ren Zhengfei, started Huawei in 1987 after he was discharged from the People’s Liberation Army. The company grew rapidly with the aid of military contracts. This is one of the main reasons why Huawei is viewed as a de facto arm of the Chinese government.

What’s the current scenario for Huawei in India?

Approximately 3,500 engineers are working in Huawei’s R&D facility in Bengaluru currently. Several projects have been relocated to China due to operational difficulties.
A lower court has granted conditional bail to the company’s India CEO Li Xiongwei once he submits Rs. 5 lakh as a personal bond and provides two Indian sureties.
The Chinese Ambassador Sun Weidong recently stated that the actions will hamper Chinese investment in the Make in India initiative. He said, “We have noted that the Indian side has recently taken a series of actions against some Chinese companies in India. Harming other’s interest will not bring one any benefits.”
India’s External Affairs Minister S. Jaishankar has said that the Indo-Chinese relationship cannot be a one-way street and signalled that the Chinese actions causing the border standoff are responsible for the current state of affairs.

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