Xiaomi in talks with component makers to boost local sourcing ahead of incentive scheme

Muralikrishnan B

In its bid to boost local sourcing of handset components, smartphone maker Xiaomi has started discussions with its partners to set up manufacturing units in India. The move aligns with the country's upcoming incentive scheme to enhance the electronics component ecosystem, supporting both domestic and export needs.

“We started with low-hanging fruits like battery chargers and cables, and over the period we evolved into mechanics like camera modules. We're also looking at fingerprint and vibrator modules, and we want to keep expanding,” Muralikrishnan B, president of Xiaomi India, told Moneycontrol in an interaction.

The Chinese handset maker is taking a two-pronged approach to locally source the components for its devices. “One is existing components where local sourcing can be done and how we can deepen it as a percentage of our total volume addition. The other direction is how more components get localised because partners have to come and set up. Whoever is there, wherever there is an opportunity, we are going to be open to exploring having conversations and seeing if the quality and commercial ratio works,” he said.

The company is in talks with its component partners to bring them to India and establish units to support local manufacturing for domestic and export needs.

The Ministry of Electronics and Information Technology (MeitY) plans to roll out an incentive scheme in August-September with an expected outlay of Rs 30,000 crore. The subsidy scheme for electronics components manufacturing is a part of the government's 100-day agenda.

The new scheme will replace the Scheme for the Promotion of Manufacturing of Electronic Components and Semiconductors (SPECS), which ended on March 31 and provided a financial incentive of 25 percent of capital expenditure for various electronic goods, including electronic components and display fabrication units.

The scheme will target select component items and focus on areas where the value-add opportunity is significant. It will also focus on components that would become strategic, similar to semiconductors.

India is targeting electronics manufacturing worth $300 billion by 2026, of which $18 billion could be for components.

Muralikrishnan said that the Indian smartphone industry is expected to witness over 10 percent revenue growth in the 2024 calendar year, citing positive growth trends in the market.

“What’s interesting is the growth in the ASP. Therefore, we expect revenue growth to outstrip volume growth. Revenue growth could even be in the low double digits or it could be upwards of 10% because ASP is clearly growing,” he added.

Demand for 5G smartphones along with requirements for higher specifications in handsets is driving the overall ASPs in the market. “Financing solutions and affordability offers are making it possible for more expensive devices to be purchased. So revenue growth will outstrip volume growth. We look forward to 2024 after quite a few years of slightly challenging times of volume and value,” he said.

Premium and IoT focus 

The handset maker is actively implementing its strategy to become a preferred brand in the country by focusing on premium smartphones and the connected Internet of Things (IoT) ecosystem, leveraging a synergized approach through both online and offline channels to reach new customers.

"We are executing the right direction...in the first quarter, amongst the top five large smartphone brands in this country, we are the fastest growing smartphone brand having executed the fundamentals of our strategy...there is just so much more to be done especially on premiumization," he said.

The executive said Xiaomi will continue expanding its ecosystem product category in 2024. "There are anywhere between 250 to 300 million households in this country. Our vision is for every household to have at least one Xiaomi product, as we see a significant opportunity for this."