NEW DELHI—Chinese smartphone seller Xiaomi Corp. said Monday its
handsets are now being assembled in India, as global electronics
manufacturers look to ramp up production in the increasingly
important and fast-growing market for their wares.
Xiaomi's phones will be put together in a plant run by Taiwanese
contract manufacturer Foxconn, which over the weekend signed an
agreement to spend $5 billion on factories and research and
development in the western Indian state of Maharashtra.
The pair of developments delivered a boost to Indian Prime
Minister Narendra's Modi's efforts to expand manufacturing, create
jobs and drive economic growth in India, which has long lagged
behind its East Asian neighbors in terms of industrial
development.
As demand for electronics, especially smartphones, has
accelerated in the world's second-most-populous nation in recent
years, more companies have said they are looking to shift
production here. But hurdles, such as poor transportation
infrastructure and a lack of local components suppliers,
remain.
Chinese phone makers Huawei Technologies Co. and Oppo Mobile
Telecommunications Corp. have said they want produce in India.
Samsung Electronics Co. recently said it invested around $80
million in an existing plant and is looking to open another, which
would be its third in India.
India's Micromax Informatics Ltd., which has the biggest share
of the cellphone market in terms of phones sold and now makes most
of its handsets in China, has also said it wants to manufacture
more phones locally.
For now, Xiaomi, said, it is importing all the parts for the
low-cost model being made here.
"Right now we are assembling phones in India," said Xiaomi's
India head, Manu Kumar Jain. "To manufacture the phone in India,
the whole ecosystem would have to exist here. We're hopeful that
this will eventually happen."
India's government says it is working to cut red tape, improve
infrastructure and make the country a more attractive place for
companies to invest.
Manufacturing now contributes 18% of economic output in India.
Mr. Modi hopes to raise that to 25% by 2022. By comparison, 31% of
China's gross domestic product comes from manufacturing. The
proportion is 33% in Thailand and 22% in Indonesia.
India represents an important new battleground for global
smartphone makers, as China's market has become increasingly
saturated and competitive.
As prices have fallen, the number of smartphones sold in India
has doubled in the past two years to 150 million. The market is
projected to grow at around 40% a year for the next five years,
according to research firm International Data Corp.
Xiaomi has been selling phones in India for about a year, in
which time the country has become its second-biggest market outside
China. The company has sold 3 million smartphones and tablets since
it entered the market.
In a sign of its India focus, the company chose New Delhi for
its first new- phone launch outside China. In April, it unveiled
the $200 Mi 4i in the Indian capital.
For Xiaomi, "the benefits are clear" for making in India, Hugo
Barra, the company's vice president in charge of global operations,
said. Mr. Barra said the company would benefit from tax breaks and
be able to deliver phones more quickly, allowing it to save on
inventory costs.
Xiaomi, which sells smartphones similar to those made by Apple
and high-end models from Samsung at a fraction of the cost, has
risen over five years to become the world's third-largest seller of
the devices, thanks almost entirely to sales in China.
Now it wants to take on its rivals by expanding manufacturing
and sales outside its home country. Xiaomi recently started making
phones in Brazil, another large developing country.
In India, Xiaomi's Redmi 2 Prime model, which sells for about
$100, is being assembled by a Foxconn plant in the central state of
Andhra Pradesh. Foxconn, known officially as Hon Hai Precision
Industry Co. also assembles Apple Inc. iPhones and Sony Corp.
PlayStation game consoles. It also makes Xiaomi phones in
China.
If Foxconn follows through on its $5 billion investment plan,
more of its clients may have their phones produced in India.
Xiaomi's Mr. Barra says that his company's presence in the
country should help encourage others to set up shop. "The fact that
we're here, and now manufacturing, allows that ecosystem to evolve
faster."
Write to Sean McLain at sean.mclain@wsj.com
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