Xiaomi Closer To Rolling Out Smartphones From India As Supplier Inventec Looks To Set Up Shop: Reports

Xiaomi Inc., which has garnered a strong online fan base in the six months that it has been present in India, the world’s third-biggest smartphone market, might be a step closer to producing a phone in the country.

The company has said on several occasions that it is seriously considering setting up a manufacturing unit in India but has not provided any details on its plans. Last week, reports emerged that Inventec Corporation, the Taiwanese contract manufacturer that makes Xiaomi’s entry-level Redmi phones, is looking to set up a facility in India. Inventec is setting up a unit in Chennai, and the process is “ongoing,” The Hindu newspaper reported, citing a spokesperson for the Taiwanese manufacturer, who didn’t provide additional details. The paper also cited an earlier report by Taiwan’s Digitimes.

In the fourth quarter of 2014, Xiaomi shipped about 800,000 phones to India, Rushabh Doshi, an analyst with Singapore-based market research firm Canalys, told International Business Times. The Redmi series smartphones accounted for 92 percent of the shipments while the mid-range Mi series smartphones made up for the remainder.

While Foxconn Technology Co. Ltd. manufactures the more high-end Mi phones -- including the latest Mi4 that Xiaomi released in India last month -- the Redmi handsets are manufactured by Inventec, according to Doshi. Inventec’s Chennai facility could go operational as early as June, The Hindu reported, citing the Digitimes report. IBTimes was not able to independently verify the Digitimes report, which is open only to paid subscribers.

An email sent to Inventec had not elicited a response at the time of publication, and a company spokesperson couldn't immediately be reached on the phone.

“Xiaomi has been working on ramping up supply, but due to its high growth trajectory worldwide, this has been a challenge,” Doshi told IBTimes. As the company operates on low margins on its handsets, it needs to ensure that its sales channels are not overstocked with devices that people do not want, he added.

“The ‘flash-sale’ model has proved effective in this regard and is helping Xiaomi build a strong demand in the Indian smartphone market,” he said.

The Mi4, which goes on sale Tuesday on online store Flipkart, attracted 200,000 pre-booking registrations within the first two days of the sale being announced, though Xiaomi is expected to make only between 25,000 and 30,000 units available for the sale, according to Manu Jain, the company's chief operating officer in India.

Manufacturing in India “may happen this year or it may not,” Jain told reporters in Bangalore at an event to promote the Mi4 on Jan. 30, but didn’t give details. The company is also looking to find a way to manufacture its smartphones in Brazil, where duties “are designed” to discourage easy imports, Hugo Barra, the company’s head of international operations, said at the same event.

“For relatively new models like Xiaomi Note, Mi 4 and Redmi 2, Xiaomi has not fully satisfied demands in its home market and hence it is challenging to push inventory to international markets without ensuring continual supply,” Canalys’s Doshi said. Xiaomi has been in India for less than a year and it still needs time to better gauge user demand, and launching its own online shopping portal will help with this, Doshi said.

While the online-only sales of a limited number of handsets has earned Xiaomi great marketing buzz, the company’s executives acknowledge that ramping up supply to meet the strong demand in India is the only long-term solution. Getting Inventec to supply its handsets from India would certainly go some way in that direction.