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In a significant setback to Vivo and the Chinese smartphone industry, Indian authorities have stopped Vivo from exporting over 27,000 smartphones for over a week. Vivo makes several of its smartphones at its Indian plants and then exports them to neighboring markets and China.

The Finance Ministry’s Revenue Intelligence Unit holds the smartphones at the New Delhi Airport. The ministry has alleged inappropriate declaration of device models and their values. The shipment that was being exported was worth well over $15 million. However, Vivo is being accused of grossly underrepresenting the weight of the load, say people close to the matter.

An industry lobby group called the government agency’s actions “unilateral and preposterous.”

“We request your kind and urgent intervention to stop this unfortunate course of action,” Pankaj Mohindroo, the chairman of India Cellular and Electronics Association, wrote in a Dec. 2 letter to the top bureaucrat in India’s tech ministry, which Bloomberg News reviewed.

“Such unwarranted actions by enforcement agencies will diffuse the drive and motivation to encourage electronics manufacturing and exports from India.”

Since 2020, tensions between India and China have had many clashes amid escalating border issues, especially around Galwan. Tensions between the two nuclear-armed nations have never been higher, except for the 1967’s Indo-Sino war. In retaliation, the Indian government has intensified scrutiny of Chinese companies operating in India, including SAIC Motor Corp Ltd’s MG Motor India Pvt Ltd and the local units of Xiaomi Corp. and ZTE Corp. This has resulted in several raids and seizure of bank accounts and other properties, over the last year.

The blockage of Vivo’s shipments at the airport will likely unnerve other Chinese smartphone players in India. Prime Minister Narendra Modi’s cabinet is also pushing Indian manufacturers to ramp up exports and build local supply chains while inviting American, European, and other Asian tech companies to come and start manufacturing their products in the country. India aims to export electronics products worth $120 billion by the end of March 2026.

In early November, Vivo exported its first batch of India-made smartphones to markets such as Saudi Arabia and Thailand. But the latest snag could cloud Vivo’s future in the world’s second-biggest smartphone market, where the company is already under scrutiny for alleged money laundering, a claim that has yet to be proven in court.

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