Towards the end of 2016, Manu Jain, the India head of Xiaomi, realised that it would need a lot more manufacturing in this country than it already does.
The Chinese mobile handset maker, which has built a strong presence in India, was struggling to meet demand, even with a third-party manufacturing agreement with Foxconn, which has a factory in Sri City, Andhra Pradesh.
“That was the most frustrating part, the supply constraint,” said Jain, who along with his team decided to go back to the drawing board, and chart out a new plan to meet the rising demand.
In 2016, Xiaomi cornered 6.6% (or 7.2 million devices) of India’s smartphone market share, according to IDC, making it the fifth largest seller of smartphones in the country, after Samsung, Lenovo and Motorola, Reliance Jio and Micromax.
However, Xiaomi has been growing fast – in the fourth quarter it ranked second, after Samsung, with 10.7% market share or 2.76 million devices.
Jain decided to add another manufacturing facility, and this was bigger than the previous one. “When the plant is running (baring lunch breaks and holidays) it produces one phone per second,” he said.
With the new facility in place, where manufacturing has started for the past couple of weeks, 95% of Xiaomi smartphones are assembled in India, except the Mi5.
Jain, however, said if the company needs to meet some unaccounted demand, it will import handsets to keep pace with the market requirement.
India is already a $1-billion market in revenue, and is the largest outside China. Xiaomi’s global sales are expected to touch $15 billion in 2017, and India will play a critical role, Jain said.
“Had it not been for the supply constraints, we would have done much better.”
But, doesn’t competition from other Chinese brands worry Jain?
“The company which can provide high-end, high-quality devices at an affordable price will win,” he said.
That is also another reason why Indian handset makers are not in the fray to compete with the likes of Xiaomi, Lenovo and Motorola.
“The brands which you mentioned did not innovate – they got the mobiles from China, branded and sold them here,” Jain said, referring to companies such as Micromax, Karbonn and Intex.
Jain’s long-term plan is not just to make money from the hardware, but also to make a lot of money from the software. It has already started making some. The Mi operating system (OS), contributed a small share to the billion dollars India revenue.
Through its associations with brands such as Amazon, Flipkart and others – the Mi browser features them – the company earns revenue through every click on these sites.
Xiaomi’s stated global plan is to make money as more people access the internet from Mi phones and its services. “That is why we track active (internet) users on the Mi devices,” said Jain.
Globally, Xiaomi has 200 million of them. He does not disclose the India numbers. “We talk about numbers only when we have reached a milestone… We aren’t there yet in active users in India,” Jain said.