India has banned 177 Chinese mobile apps since June, including key games such as PUBG Mobile, Mobile Legends and Rise of Kingdoms.

India’s Ministry of Electronics and Information Technology banned 118 Chinese mobile applications on September 2nd, in addition to the 59 apps that were banned at the end of June. The move comes after rising tensions between India and China, including border clashes, with the Indian government claiming that a number of Chinese developed and published applications pose a national security risk by collecting and sending data back to Chinese servers and the Chinese government about Indian users. This enabled the Indian government to invoke its power under Section 69A of the Information Technology Act to ban Chinese mobile apps, pull them from app stores, and cease operation of the apps already installed.

India has also clamped down on foreign direct investment from China with the aim to curb takeovers of Indian firms from Chinese companies, as Niko wrote about in this article earlier this year. Prime Minister Narendra Modi spoke out in support of creating a national games industry and emphasized that India should tap into the growing digital gaming sector by developing games that are inspired from Indian culture and folk tales, just before the announcement of more banned apps on September 2nd.

Merely three games were in the June batch of 59 banned Chinese apps: Mobile Legends, Clash of Kings, and Hago Play. The September batch has 35 games (out of 118 banned apps), including popular titles such as PUBG Mobile, Rise of Kingdoms and Ludo All Stars. Other notable apps banned since June include TikTok, WeChat, UC Browser, Alipay, Bigo Live, Huya Live and Youku. TikTok is extremely popular in India and used by many on a daily basis, and PUBG Mobile and Mobile Legends were in the top 10 grossing games chart for H1 2020 in India (#1 and #10, respectively). Furthermore, there is concern that the trend from these government app bans plus the Army app ban might lead to bans extended to studios that have Chinese ownership such as Supercell, Riot and MiniClip.

The impact on the video games market in India will be significant. PUBG Mobile has nearly 200 million downloads in India with the Lite version accounting for 70% of these since its release in July 2019. PUBG Mobile has been a key driver of growth for India’s game market as it was one of the first mobile battle royale games and introduced a growing gaming audience to a core game experience. Furthermore, the ban will not just impact players of the game, but also the fast growing esports and influencer ecosystems as numerous Indian Youtubers and esports pros had built massive followings through playing PUBG Mobile.

Garena’s Free Fire, which was the second highest grossing game in India during H1 2020, is in a prime position to absorb the PUBG Mobile player base as it has the ability to run on low-end smartphones while providing a high-end experience. We expect Garena to ramp up marketing for the game in India to try to acquire PUBG players. Another title that would benefit from the bans is Call of Duty (COD) Mobile, which also has a battle royale mode, on top of its traditional shooter gameplay. However, we note that COD Mobile is developed by Tencent (published by Activision), so also is at risk of being banned.

Other games banned include Mobile Legends from Moonton and Arena of Valor from Tencent. Both games are popular MOBA titles with Mobile Legends ranked the #1 grossing MOBA title in the country and the 10th highest grossing game in India during H1 2020. The ban of these two titles leaves a vacuum in the MOBA category that will be hard to fill. Local developers have yet to develop a successful MOBA title and there is room for a developer to come in and exploit this market. Supercell’s Brawl Stars, which is already in the market, could fill this gap. Riot Game’s upcoming League of Legends: Wild Rift is another contender. However, both Riot and Supercell are 100% owned by Tencent, again leaving them at risk.

India’s games industry will suffer from the ban of these important games. There will be fewer choices for gamers and they will be frustrated. Indian development studios are not as mature as Chinese or Western studios, and will struggle to fill the void at this time. Chinese game companies—such as Yoozoo—that are building Indian operations to work on localization, development and publishing in the country are disincentivized. Indian developers have achieved high quality casual games in niche genres, such as cricket-themed mobile games, but not yet mid-core and high-end games.

On the other hand, the bans do open up India to investment from other countries. For example, US tech firms such as Microsoft, Google, Facebook, Intel, Qualcomm and others just this year announced investment in Reliance Jio, the country’s largest telecoms provider.

Chinese authorities and the developers themselves have launched an appeal regarding the decision to ban its apps. Speaking to local students in India, we found that concern is high about India-China relations and they believe that Chinese apps could pose a security concern. The students we spoke to deemed that some of the bans were implemented unfairly, because it is understood that many Chinese app developers had already switched to local servers to store data. It is unclear whether data storage inside India’s borders is sufficient to calm the fears of the government and hence enable them to reverse the ban on 177 apps from China.