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Xiaomi's Success in India Could Impact the Global Supply Chain

Posted by Daves Zandueta | July 12, 2016

India is becoming a battleground for market share among smartphone makersand success will come down to supply chain.

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Growth Strategy

India is the world’s second-largest—and fastest growing—smartphone market in the world. Only China has more smartphone users, but growth is slowing.


China saw a measly 2.5% growth of shipments in 2015, according to International Data Corporation (IDC). That’s compared to 62.5% in 2013. IDC likewise notes a lackluster 2% year-on-year growth for smartphones shipped to the country in Q1 of 2016. So now, smartphone designers are looking to Indian markets for a boost in sales.


Xiaomi entered the Indian market in 2014 and reported a 135-percent sales growth that year. Its growth in 2015, however, slowed to 3 percent. Such results didn’t stop Xiaomi from taking chances with India. In August 2015, the company began making its smartphones in Andra Pradesh through Taiwanese contract manufacturer Foxconn.


Part of Xiaomi’s strategy is to only sell its products online. If the company is to sell more phones in India, according to an analyst at Counterpoint Research, then it might have to reach out to single-brand retail stores. But standing in Xiaomi’s way is India’s mandatory 30 percent local sourcing criteria. Last April, Xiaomi requested an exemption from that criteria at the Department of Industrial Policy and Promotion. However, the company later withdrew the request.


This month, Xiaomi teamed up with Just Buy Live to sell its products in Indian retail stores. As the company gauges its success in India, a shift in manufacturing location may appear to be a more cost-effective move. The company is already in talks with the government to boost its local manufacturing presence—if the government can work with corporations, then India is set to become a global manufacturing hub.

 

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