Economic Times: August, 2015
Visakhapatnam: China's Xiaomi launched its first India-made phone, the Redmi 2 Prime, and announced a tie-up with Taiwan's Foxconn to make smartphones in the country, giving a huge legup to the government's efforts to boost local manufacturing.
Foxconn is expanding its Sri City plant in Andhra Pradesh - where it assembles completely knocked down Xiaomi phones -- and expects the additional capacity to be ready by December. ET was the first to report that Foxconn would make Xiaomi phones at the Sri City plant in its July 15 edition.
"When we started out in July last year, we wanted to become part of the fabric of India," said Hugo Barra, vice president of Xiaomi Global. "Over time, all of our phones that we sell in India will be made in India." He didn't give a timeline.
"There are also significant benefits in terms of supply chain perspective. For a company like ours, which operates on a business model of very low margins, this (made in India) means we can operate on little or zero inventory, which is absolutely critical," Barra said. Making in India would result in lower operational costs, increased efficiency and lower-priced smartphones for consumers. It would halve the time taken to get phones to partner warehouses to two weeks. Both cost and time are critical in the price-sensitive and competitive Indian market.
The Redmi 2 Prime is priced at Rs 6,999 and available on the Amazon, Snapdeal and Flipkart websites. Barra said Xiaomi was prepared with high inventories for the Redmi 2 Prime since all these devices are made in India for sale here. The price is lower than importing the device.
India is the second country outside China to get Xiaomi devices locally made after the Beijing-headquartered company got Foxconn to make its phones in Brazil in July. However, Xiaomi, the world's seventh-largest smartphone vendor globally in Q1, as per Gartner, and China's largest, took almost 18 months to set up the Brazil unit, three times longer than in India.
Xiaomi clocked sales of 3 million devices by July-end to be among the top seven smartphone vendors in India and may be the only handset vendor to start making phones in the country within a year of entering the market. Until now, all its products, including phones, were imported from China, a model followed by most companies that sell mobile phones in India.
Xiaomi now follows South Korean rivals Samsung Electronics and LG in manufacturing in India. The Make in India move is a big boost for Xiaomi, which has created a strong presence in the Indian market on the back of the high-specification, lowpriced smartphones it sells.
Such devices have become the company's USP across the world and made it a stiff challenger to leaders Samsung and Apple - companies it is taking on in India as well. Xiaomi's local manufacturing and its plans to start selling phones through brick-and-mortar stores in 10-15 cities over the next two months underlines the importance of the Indian market, which has become its largest outside China.
India head Manu Jain said the company may consider exporting devices from India, while focusing on Make in India for now.
Department of Industrial Policy and Promotion Secretary Amitabh Kant said the Xiaomi-Foxconn tie-up has the potential to kickstart the manufacturing momentum in India.
"India will become a great manufacturing nation. Xiaomi should make all your products in India which will enable you to penetrate global markets and take Samsung and Apple head on from Andhra Pradesh," Kant said. "If you continue to manufacture from here, you will emerge a winner, beating Samsung and Apple from India.
Xiaomi has a dedicated Foxconn facility in Sri City, which has multiple assembly lines. Jain did not share details of the existing or projected capacity. A person familiar with Foxconn's plans said the company is expanding its Sri City facility by 250,000 square feet and 20 assembly lines by December. Currently, the plant occupies 60,000 square feet and has four lines.
Barra said that by setting up in India, it had solved the chicken-and-egg situation and will now help build the component ecosystem in the country, which is currently absent. Xiaomi gets its smartphones made by Foxconn and Inventec in China, the company's home market.