WINNING INDIA

China’s Xiaomi has just shown how serious it is about India

Quartz india
Quartz india

With a special flash sale, the launch of a flagship device and an investment in a local media company, China’s Xiaomi is upping its game in India.

On Wednesday (April 6), Xiaomi, the world’s fifth largest smartphone maker, will hold a flash sale on its Indian website to mark the company’s sixth birthday. The sale will include mobile phones, power banks and mobile phone accessories. The highlight of the event is Xiaomi’s flagship Mi5 model, which was launched in India on March 31. India is the first market outside China where the Mi5 will be made available.

“Mi Fan Festival is every Mi Fan’s biggest opportunity to get fantastic deals from Mi, and we’re super excited to host this in India for the first time!” the company said on its website.

Earlier this week, Xiaomi announced its first investment in an Indian company when it led a $25-million funding round in digital media entertainment firm Hungama. Other investors in the round included Intel Capital, Bessemer Venture Partners, and billionaire Rakesh Jhunjhunwala.

“This is the first ever investment that Xiaomi has made in an Indian company. It marks the deepening of Xiaomi’s strategy to introduce localised internet services, in particular content, on its smartphones in India,” the company said in a press release. “The move also further solidifies Xiaomi’s commitment in India.”

Xiaomi & India

India is the second-largest smartphone market in the world, but penetration is still low. Of the over 1.2 billion people in India, around 200 million own smartphones. The opportunity has attracted many global players and led to the formation of several home-grown companies.

Xiaomi entered India in July 2014 and ended the year with a 1.5% marketshare, according to market intelligence firm Counterpoint Research. In 2015, it doubled its marketshare to 3%, but continued to be a small player in a market dominated by foreign brands such as Samsung and Lenovo, as well as homegrown ones like Micromax and Lava.

In 2015, Xiaomi began manufacturing in India. Over 75% of its smartphones sold in India now are locally made, which helps the company cut operational costs.

What next?

The launch of Mi5 could help the company capture more marketshare in India in 2016, Counterpoint Research said.

However, “there is still room for some upgrades” in Xiaomi’s India portfolio. The company should add some devices in the “entry-level and mid-level segments to drive volume in 2016,” said Nitish Pande, research analyst at Counterpoint Research.

Pande also expects Xiaomi to make more investments like Hungama. “As hardware ceases to be the differentiating factor within smartphones, we estimate that the next level of growth will come from vendors which will successfully position their software capabilities,” Pande said. “Xiaomi needs to move in the same direction as it strives to differentiate itself from rest of the competition… We expect Xiaomi to invest further in the local ecosystem in 2016 from software and services perspective and try to build a recurring revenue model.”

To sell more, Xiaomi may need to start selling phones in stores. Its devices are only sold online in India; few people outside major cities currently buy products online. “The limited mode of distribution (online only) can be a challenge when it expands its reach beyond metros in India,” Pande said.

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