It’s not often that companies have the luxury of picking a moment in time to reconfigure focus areas and approach. Tech company Xiaomi is navigating exactly such a conjuncture, coincidentally as it completes nine years in India. They are used to defining defining moments in India’s journey towards reaching the milestone of one billion smartphone users this year. There is a significant strategic shift in the way Xiaomi wants to approach business over the next few years, according to Muralikrishnan B, president of Xiaomi India.
This will be the common theme across all of Xiaomi’s product lines in India, including smartphones, Internet of Things (IoT) devices, TVs and tablets. “The focus is on efficiency, durability and built on a secure foundation,” Muralikrishnan said, in a briefing, of which HT was a part.
In terms of the overall picture, Xiaomi is venturing into new areas. Smart manufacturing is one of them, with the smart factory in Beijing. There is also the development of the electric vehicle. The company said it was at an advanced stage, with plans to launch the first electric vehicle in China next year. There are currently no plans to launch electric mobility vehicles in India.
Last year, Xiaomi also built a humanoid robot, CyberOne, which has since also learned to play the drums. It is a space that the company will continue to develop.
“It’s the start of what could be some interesting times ahead. Very early on, but it’s important to get some out there,” Muralikrishnan said, but cautioned that it wasn’t about “But it’s important to at least start to establish that, we’re doing that too and intend to do that on a large scale, if things go the right way,” he said. added.
Existing and new areas will require significant investments, for which the company has plans, on a global scale. This includes an investment of more than 100 billion RMB (Renminbi) until 2026 and the acquisition of 32,000 patents.
Smartphones: get rid of the bloat
In India, the company is embarking on a simplification of its smartphone lineup, which spans different price points under the Redmi and Xiaomi umbrellas. Right now, there are as many as 15 phone models under the Redmi banner, and that’s before we get into the details of storage and memory configurations. The Xiaomi range has 9 different phones, with other variants for each.
One of the reasons this has happened over the past two years is the shortage of chipsets that started during the pandemic.
Anuj Sharma, Marketing Director at Xiaomi India explained. “What did we do when we didn’t have enough chipsets? This is where we started expanding our portfolio. If we only get a particular number for a specific chip, and although there is more demand, we also have another chip option. This unfortunately led to a bloated portfolio,” he said.
This simplification will be completed in the coming months as some older devices are phased out and some are replaced with newer and upgraded options. Xiaomi’s leadership in India is inspired by the early days, which involved a much smaller number of phone models on sale, which propelled them to the top spot in smartphone shipments for many years.
Anuj Sharma recalled the journey that started with some excitement with the Mi 3 phone in the summer of 2014. He believes the method used back then, flash sales to compensate for limited inventory, helped to ‘era. In a sale in early August that year, 15,000 units were sold in two seconds on the Flipkart e-commerce platform.
It was later that year that Xiaomi focused on the Redmi 1s phone, a 2014 lineup that Sharma said didn’t live up to the excitement created by the predecessors. “Normally we tend to remember good things when we think about the past, but we’ve made a lot of mistakes,” he said.
The first visible transition to the new strategy will be the affordable smartphone Redmi 12, which will launch in early August and is expected to include variants with 5G network support. The company has not confirmed the price of this phone.
Based on India’s one billion smartphone users, more than 100 million are already using 5G smartphones, according to the latest data from Counterpoint Research. Reliance Jio and Airtel offer 5G upgrades to 4G users, at the same prices and also offer optional unlimited 5G data plans.
Made in India: no longer under the umbrella
Muralikrishnan said Xiaomi has been making phones in India since 2015, but it’s a mission that is “intensifying and accelerating today”. He said that every Xiaomi or Redmi smartphone sold in India is made in India. The same goes for all smart TVs.
“Huge progress has already been made in terms of component localization. The battery charger and cable were made three years ago. Then we had camera modules along with the front and back cover, among other things,” Muralikrishnan said.
Xiaomi has a contract in place with Dixon Technologies to manufacture televisions. Last month, a deal was struck with Optiemus to manufacture true wireless headphones in India.
Plans for the next two years involve expanding the domestic value-added scale, for every phone made in India.
“Some of the things we’re working on this year include display modules, fingerprint sensor, vibration motors, and multiple cutouts. We also look at bare PCB boards and battery cells. These are the kinds of conversations we have to localize and increase national added value,” he added.
Xiaomi confirmed to HT that if these plans materialize over the next few years, the domestic value-added component for each smartphone on sale in India is expected to increase to around 30% from 17% currently. Based on this, the company calculates the ex-factory price of a phone, less the cost of component inputs.
“I think we are reasonably ahead in the race compared to many other made-in-India brands, and that is something we will continue to pursue and work with domestic partners,” he added.
Reclaiming the top spot: a long way to go
Last year’s challenges and more, including the country’s investigative agency scanner, saw the smartphone maker slip away from the top spot in market share metrics. Something that must have felt like uncharted territory, after long periods at the top.
According to IDC’s Q1 2023 data, Xiaomi’s market share fell to 16.4% in India, from a market leadership perspective of 23.4% in the same quarter of 2022. This now puts it behind Samsung (20.1%), Vivo (17.7%) and Oppo (17.6%).
Market share is calculated by the number of shipments.
“We knew very clearly as we approached the fourth quarter of 2022 that we would lose the number one position. It was a conscious call. We prioritized sustainability and profitability,” Muralikrishnan said.
“Some of the changes we’re making and getting that base in this cleaner portfolio, focusing on democratizing 5G, focusing on the customer experience, and ensuring the harmony and growth of online and offline channels, are long-term bets, which will help us in 2024 and beyond,” he said.
It’s the long and painful road, which may include more bumps and stiff competition from other Android smartphone brands, but a leaner and more focused Xiaomi may be better prepared to navigate.