India’s leading smartphone maker Xiaomi will not increase the prices of its existing mobile phone models despite wafer-thin margins, benefiting local consumers who would otherwise have had to pay more after North Block raised the levy on component imports in the federal Budget.
Xiaomi, which dethroned Samsung to head the India leader-board for two consecutive quarters, plans to sustain its leadership by launching six to eight phone models this year, besides the Mi TV, for which is it exploring local manufacturing. It also expects offline sales to make up 30-40% of its overall revenue by the year end, from around a quarter at present.
According to Economic Times Manu Jain, managing director of India operations and global VP, said that the Chinese smartphone maker — it launched two new smartphones Mi Note 5, a global first Mi Note 5 Pro, and its popular Mi TV in India on Wednesday — was working on a plan to absorb the impact of the increase in the import duty on components. To be sure, Xiaomi makes 95% of its mobile phones in India through Foxconn’s India arm.
“We’re working on a plan which will hopefully ensure that we won’t have to raise prices. Of course, we don’t have the margins but we won’t increase prices,” he said, while supporting the government’s move that was aimed at strengthening the Make in India programme.
“We will definitely consider local assembly once they reach a certain threshold. We will have to take two things into consideration; one, whether the scale can justify the financial investment that either us or our partners make, and two, whether the kind of technology we need to make the TV here can be built,” Jain highlighted. He added that the company may consider its existing partners here, or companies such as TCL that manufacture the TV-sets in China.
As part of the Union Budget on February 1, the government increased the import duty on chargers, adapters, battery packs, microphones, wired headsets, keypads, antenna, sidekeys, and USB cables, from either 7.5% or 10% to 15%. Xiaomi does not make mobile phones or other products on its own but has partnered with contract manufacturers Foxconn and Hipad Technology, for making smartphones and power banks, respectively. Xiaomi added that it was looking at local manufacturing of Mi TV in India given that duty on parts used for assembling TV panels were also raised in the Union Budget.
Jain did not comment on whether the company was evaluating sourcing local components, but said that the Indian market was ready for higher level of component manufacturing such as assembling printed circuit boards and value addition, owing to the fact that it was the fastest growing smartphone market in the world. “If not in India, then where… the volumes are incentives enough.”
“From a long-term perspective, this move is great for India because it will ensure that a lot of people start manufacturing locally and not just assemble here, but add value by buying local components,” he added.
Mi TV, which will begin selling across online and offline channels from next week, is being imported at present. The company said that its model will be to disrupt the TV segment in India, just the same way it did in smartphones. The TV market in India — at 10-12 million units, of which only 10% is online — was similar to the smartphone segment. About 33% of India’s smartphone market now is through online channels including Amazon, Flipkart and other Web-commerce companies.
