Chinese smartphone and consumer electronics company Xiaomi, which has completed its 10 years in India, on Monday said that it is looking to deepen its focus on domestic value addition and local sourcing of components.
The smartphone maker is targeting to increase its share of sourcing non-semiconductor smartphone components locally to 55% over the next two years from 35% at the present, Xiaomi India president Muralikrishnan B said in a media interaction.This localisation will help Xiaomi increase its net domestic value addition to 22% by 2025 from 18% at present.
The company so far has been sourcing components such as battery, chargers, cables, camera modules, and front and back covers, among others, locally. “We are working on partnerships to source more components locally and deepen the localisation. This means increasing the percentage of volume that you will source locally,” Muralikrishnan added.
These comments assume significance as lately the government has been focusing on increasing the domestic value addition and focus on local sourcing of components to reduce import dependence.
“We have been talking about localisation for a really long time and this does lead to cost efficiency,” Muralikrishnan said, adding that the company would also look to source semiconductor components from the country once the ecosystem is developed.
In a bid to achieve the localisation targets, the company is looking to add more Indian manufacturers and explore more products for domestic manufacturing.
Xiaomi makes smartphones and smart TVs in India through contract manufacturing partners such as Dixon Technologies, Bharat FIH, Dixon, BYD and DBG. The company has also inked a partnership with Optiemus Electronics to manufacture audio products locally.
As of the January-March quarter, Xiaomi secured the second position in the smartphone market with a share of 18.8% in volume terms. The company’s shipments grew 28% y-o-y owing to its shift in focus towards a leaner and streamlined portfolio and a proactive offline channel strategy, according to Counterpoint Research.
“In the next decade, Xiaomi aims to ship an incremental 700 million devices in India,” Muralikrishnan said. From 2014-2023, that is in the last decade, the company shipped 250 million smartphone devices in India. Shipments means products sold to dealers and retail stores.
The company is looking to drive on the premiumisation trend as well as focus on the lower price range to serve the customers.
When asked about how the company is looking to compete with peers Apple and Samsung on value, Muralikrishnan said, “There was a point of time when being number one was the most important thing for us. Now, the focus is to be the most preferred brand and to win the love and trust of customers.”
“We agree that we are lagging in terms of ASPs (average selling prices). We have a clear plan to scale our ASPs. Over the next 2-3 years, we will catch up with the market ASPs,” he added.
In terms of value, Xiaomi’s market share was at 10% as of March-end.
Notably, over the last 10 years, the market ASP was close to Rs 9,000 for Android devices and today it has grown over 2.5 times and touched Rs 21,000.
On leveraging generative AI in smartphones, Muralikrishnan said, “Generative AI is just a feature. AI is a foundational layer and we need to think about what use cases we can leverage AI to deliver predictive contextual and personalised experience. That is what will define the true power of AI.”
The company is looking to leverage both hardware and software to drive the usage of AI and not just bringing in generative AI use case.
According to industry estimates, the smartphone market is expected to grow at a compound annual growth rate (CAGR) of 5-6% and AI will be key towards driving user experience going forward.
Xiaomi is banking on an end-to-end premiumisation play, integrated smartphone Artificial Intelligence of Things (AIoT) offering and omnichannel strategy for its next leg of growth.
(The writer was in Bengaluru at the invitation of Xiaomi India)