Xiaomi India eyes increased localization, Apple-like ecosystem

The company has laid out a three-year roadmap, focusing on building an Apple-like ecosystem and increasing the localization of its supply chain.

“Localisation of our manufacturing is created by a combination of supplies from abroad, as well as from India," Muralikrishnan B, presdent, Xiaomi India, told Mint. 

“Today, we continue to have conversations to figure out how more of our supply chain partners, based in China or elsewhere, come and set up shop in India. This is an ongoing conversation where the suppliers evaluate their move based on market potential, commercials, approvals and more. Almost 50-60% of the non-semiconductor bill of materials gets sourced locally which includes mechanics, fingerprint and camera modules, and more."

Xiaomi's roadmap

Along with the localisation plan, Xiaomi India has a three-year plan to revive its market share across various product categories. The company's sales dipped after leading the market for five straight quarters until the end of 2022.

“We’re looking at 2024 to rebound after hitting a speed bump in 2022 and going through a recovery phase last year. Now, our three-year strategy for India includes changing buyer perception in premium price ranges, create a complete device ecosystem, and focus equally on online and offline sales channels. This is helping—in the first three months this year, the smartphone market grew 15%, while our shipment grew 29% during this period," said the top executive, known among his peers as Murali.

The top executive, however, declined to comment on whether the company has been looking for an India equity partner to continue business in India. 

While the Indian government has not explicitly said that Indian ownership is needed for a Chinese brand to operate in India, Chinese smartphone brands have come under a lot of scrutiny by enforcement agencies on grounds of tax evasion and alleged money laundering.

Also Read: Chinese stuff at Indian telcos: An old chapter reopens

Murali also did not comment on a letter addressed to the central IT ministry on how best to increase localisation of its operations. However, he claimed that Xiaomi’s “India relationship works differently from many other brands."

A senior executive who works closely with Xiaomi’s India hierarchy claimed that Murali’s letter to ministry of electronics and information technology (Meity) was in response to the latter’s correspondence to Xiaomi India, seeking insights on its contributions to the local electronics and supply chain ecosystem. 

“Xiaomi India’s conversations with Meity have also been about increasing localisation of the entire manufacturing ecosystem. It was one of the first major brands in China to sign a comprehensive local manufacturing deal with Dixon. In fact, Xiaomi has been working with the latter since 2018," the executive further added.

However, it will remain to be seen how this discussion ramps up. China-owned automobile brand MG Motors signed a joint venture agreement last month with Mumbai-based industrial conglomerate JSW Group, which waspushed by the Centre’s mandate for China-owned brands to operate only on the condition of a JV in India. 

China’s Vivo, which finished second last year, is also believed to be under pressure to find a JV partner in the country. Chinese technology conglomerate BBK Electronics owns the brand.

Murali, however, added that he expects more continuity from the National Democratic Alliance (NDA)’s third term at the Centre. 

“The fact that electronics is a huge focus area for the government is now well established. There is a clear vision laid out wherein India wants to be a $300-billion electronics industry, with domestic consumption contributing $140 billion and the rest coming from exports," he added. “There is enormous progress that is being made—multiple companies have contributed to it. The arc of growth and development in the electronics ecosystem (in India) is clear. As long as that continues, everybody benefits from it."

Murali is optimistic about the consumer market in 2024. “For prices of up to ₹30,000 in smartphones, 5G is the main growth driver, and devices from ₹10,000 to ₹30,000 are now nearly 100% 5G-compatible. In the inflation-agnostic premium market, consumers have access to credit and, thanks to ample credit and financing options, are cycling through their phones much faster. This upgrade cycle is around 1.5-2 years and is rising in the entry to mid-range prices to even three years," he further said.

According to market researcher IDC India, Xiaomi ended 2023 as the fourth top-selling brand in the India smartphone rankings. The latter’s $39-billion annual market defines the bulk of Xiaomi’s India operations. The company’s shipments were down 29% last year, a factor Murali hopes to reverse this year.

Also Read: Think again: Apple will likely recover from its slump in iPhone sales