Xiaomi Sees Next China in India With Push for 100 Million Phones

Aug 07, 2014 12:01 pm ET

Aug. 8 (Bloomberg) -- Xiaomi Corp. sees Indian demand for its smartphones eventually equaling that of its home market China, where the company shipped 15 million devices last quarter to outpace Samsung Electronics Co. and Apple Inc.

“It is the biggest market for us beyond China, it will someday be as big as China,” Xiaomi Vice President Hugo Barra said in a phone interview from Bengaluru. “We are coming into India with full force.”

The push is part of Chief Executive Officer Lei Jun’s plan to boost his global smartphone sales fivefold to 100 million units next year. Xiaomi, which recently started an overseas business targeting the Chinese diaspora, teamed with Indian e- commerce site Flipkart.com to sell its Mi3 phone last month for 13,999 rupees ($228).

Beijing-based Xiaomi offered 35,000 phones in three online sales in India so far, and they sold out within minutes. Barra, who moved to the southern city of Bengaluru to lead Xiaomi’s efforts, said the company underestimated demand and will boost supply.

“We have to ramp up,” Barra said in the Aug. 6 interview. “It’s not something we can do immediately because we are subject to manufacturing constraints.”

Barra declined to say how much the company is investing in India.

Samsung, Micromax

Four-year-old Xiaomi is entering a market where South Korea’s Samsung and local makers Micromax Informatics Ltd. and Karbonn Mobiles India account for 60 percent of sales, wireless carriers don’t subsidize the costs of devices, and the pool of Chinese speakers familiar with its products is smaller.

Sales in India have been driven by word-of-mouth, and Xiaomi underestimated interest in its products when it analyzed social media to gauge demand, Barra said. More than 200,000 people registered to participate in online sales events, he said.

Xiaomi is beginning sales in 10 new markets including Brazil and Russia. While the company started its own websites in Singapore and Taiwan, India has proved more difficult because the infrastructure for delivering packages and collecting payments is underdeveloped.

“We know it’s a market where it will pay off to really build a local brand in a full-on local operation,” he said. “We’ve got to move faster than what we previously assumed.”

Vendors shipped about 13.5 million smartphones in India during the first quarter, compared with about 97 million in China, according to researcher Canalys.

Boosting Investment

Xiaomi has generated sales in China by offering cheaper devices packed with high-end features. The Mi3 smartphone, which sells for less than a third the cost of an iPhone 5s, sports a high-definition screen, 13-megapixel camera and Qualcomm Inc. Snapdragon processor.

The company toppled Samsung last quarter to become the largest smartphone seller in China, according to Canalys, and now is the sixth-largest smartphone manufacturer globally, according to researcher IDC.

Barra joined Xiaomi last year from Google Inc., where he was a vice president helping oversee product management for its Android operating system. He was a public face for some of Google’s key efforts around Android, which runs Xiaomi phones.

“I’ll be here for the foreseeable future,” he said. “I don’t have a return ticket to Beijing or anything like that.”

Xiaomi plans to boost staff in India to about 20 people, including workers to run two service centers, by year’s end. The company will contract with other companies for 34 additional service centers and will hire software developers to build applications focused on Indian users.

“The products we make for India, they are unique,” Barra said. “It’s unique packaging, unique labels, the software on the device that we sell in India is unique.”