Xiaomi tries to bring its component suppliers into India to gain investment

China’s Xiaomi is trying to bring its global component suppliers in India. The smartphone firm, leading player in the local market since late 2017, hosted some 50 suppliers in Gurugram on Monday. It is also trying to create a bridge between the component makers, mostly from China, and representatives of the Uttar Pradesh and Andhra Pradesh governments.

Key management personnel from Shenzhen-based BYD Electronics and O-Film Technology, Huizhou-based Biel Crystal Manufactory, Yuyao City-based Ningbo Sunny Opotech and Hunan-based Lens Technology, among others, will be visiting proposed sites in the two states to set up manufacturing units. 

Chinese component makers, primarily into assembly of handsets and producing cover glass, camera lens, camera modules and mobile chips, are expected to finalise plans after understanding the handset eco-system in the country. 

If all its suppliers set up base in India, this could potentially bring investment of at least Rs 150 billion and create 50,000 jobs, according to Xiaomi. The firm entered India in mid-2014 and managed to take top spot in the smartphone market in less than four years. 

Under the government’s Phased Manufacturing Programme (PMP), the import duty on components have been raised significantly in recent months. 

Going local

  • 50 vendors now in talks with UP and Andhra governments
  • Investment of Rs 150 bn, 50,000 new jobs if all suppliers set up units here
  • 16% local addition, up from 10%, as Xiaomi sets up plant with Foxconn
  • Four more handset assembly units in Sri City, Noida, and Sriperumbudur to ramp up local production

According to its first phase, 2017-18, the government had attempted to boost production of mechanics, die-cut parts, microphones and receivers, keypads and USB cables. Printed circuit board (PCB), camera modules and connectors are being targeted in FY19. Other key components like the display assembly, touch panels, vibrator motors and ringers are kept for FY20. This has potential to dent Xiaomi’s run, as it relies on offering handsets at competitive prices.

As the government’s push towards local manufacturing of smartphones gains pace, Xiaomi is trying to take a lead. Recently, its head of operations in India and global vice-president, Manu Kumar Jain, met key people in the Union government — minister of information technology Ravi Shankar Prashad, minister of commerce Suresh Prabhu and chief executive of NITI Aayog Amitabh Kant — to discuss Xiaomi’s role in the Make in India and Digital India initiatives. 

Xiaomi is starting assembly of PCB in association with handset supplier Foxconn in Tamil Nadu. This would help to bring down the cost of handsets, as local assembly would mean value addition going up to 16 per cent, from the current 10 per cent. PCB forms over half the cost of making a handset. Xiaomi aims to procure its internal requirement for PCBs locally by this September.

Growing demand in recent quarters have put supply pressure on its two handset manufacturing units in partnership with Foxconn.

To ramp up production, Xiaomi is also beginning to source from four more units — one in Noida in partnership with its power bank supplier Hipad and three units with Foxconn in Sri City, Andhra Pradesh and Sriperumbudur in Tamil Nadu.

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