The parent firm of Micromax, Bhagwati Products, is apparently close to purchasing one of Vivo’s factories in Greater Noida. Vivo is a massive Chinese smartphone manufacturer. This action, which was motivated by strategy realignment and growing regulatory pressure, has important ramifications for both businesses and the larger Indian smartphone manufacturing industry. The potential consequence of this agreement is multifarious, with Bhagwati Products set to exploit this acquisition and Vivo ruling the Indian smartphone market in sales from January to March of 2023.
Credits: Finance Outlook India
Strengthening “Make in India” Initiative
This deal’s connection with the Indian government’s “Make in India” push is one of its most noticeable effects. The goal of this program is to increase domestic manufacturing and entice foreign companies to establish operations in the nation. Bhagwati Products’ acquisition of Vivo’s facility highlights a tactical move towards further localization of smartphone production in India.
Bhagwati Products is anticipated to increase its manufacturing capacity through a partnership with Huaqin, Vivo’s original design manufacturing (ODM) partner. Through this partnership, Bhagwati will be able to produce more while also guaranteeing the transfer of technological know-how and sophisticated manufacturing techniques to India. This action will therefore probably have a major positive impact on the expansion of India’s industrial sector, resulting in the creation of jobs and the promotion of technical innovation.
Leveraging the Production-Linked Incentive (PLI) Scheme
Vivo and Bhagwati Products’ collaboration is in line with the advantages provided by the production-linked incentive (PLI) programme for smartphones implemented by the Indian government. The goal of this plan is to draw significant investments in the production of components and mobile phones. Through the sale of its facility to Bhagwati Products, Vivo will be able to take advantage of these advantages in an indirect manner.
However, Bhagwati Products will immediately benefit from these advantages. Vivo can earn a portion of the financial benefits from the PLI plan in exchange for the manufacturing contract, resulting in a win-win situation for both parties. Vivo can continue to operate in the Indian market without having to shoulder all of the financial and regulatory burdens, and Bhagwati Products can increase its market share thanks to this calculated decision.
Enhanced Competitive Edge for Micromax
With this acquisition, Micromax has a great chance to reclaim market share in the Indian smartphone industry. Formerly a leading player, Micromax has recently had to contend with fierce competition from Chinese producers. By acquiring Vivo’s factory, Micromax gains the technological advantage and infrastructure required to compete more successfully.
Micromax will be able to develop smartphones with cutting-edge features and reasonable price, appealing to a wider user base, thanks to the partnership with Huaqin. Additionally, Micromax can strengthen its competitive stance and quicken its market penetration by utilizing Vivo’s well-established brand recognition and market presence.
Regulatory and Strategic Implications for Vivo
Vivo made the strategic choice to sell one of its plants in order to lessen regulatory pressure in India. Vivo was forced to look into other business plans in order to continue operating in the Indian market due to the increased regulatory scrutiny and difficulties faced by Chinese enterprises there. Vivo can better navigate the regulatory environment and continue to service the Indian market by moving its manufacturing operations to Bhagwati Products.
Vivo can now concentrate on its recently constructed 169-acre Greater Noida factory, which cost more over Rs 5,000 crore to build. Vivo’s production capacity and technological prowess are anticipated to increase with the completion of this cutting-edge plant, solidifying its position as the industry leader in India.
Broader Impact on the Indian Smartphone Market
Bhagwati Products’ purchase of Vivo’s manufacturing is probably going to have a bigger impact on the Indian smartphone market. This transaction represents a growing trend of cooperation between Chinese and Indian businesses, creating a more competitive and integrated market. With more international companies thinking about local collaborations and investments, the Indian smartphone manufacturing industry is expected to undergo substantial expansion and change.
Furthermore, this deal’s improved production capacity may result in more reasonably priced smartphones being available in the Indian market. This could support India’s attempts to promote digital inclusion by increasing smartphone penetration rates, especially in rural and semi-urban areas.
Conclusion
An important turning point in the history of smartphone production in India may be the prospective sale of Vivo’s Greater Noida plant to Bhagwati Products. This action benefits Vivo and Micromax strategically by using the advantages of the PLI scheme in addition to being in line with the “Make in India” goal. This deal is an example of how local and international competitors in the Indian smartphone market are adapting their strategy as regulatory constraints continue to influence the market dynamics. The partnership between Vivo, Bhagwati Products, and Huaqin is expected to stimulate growth, improve competitiveness, and promote innovation in India’s rapidly expanding manufacturing industry.
