VISAKHAPATNAM: Chinese smartphone maker Xiaomi Corp. became a high-profile addition to the list of global companies that are manufacturing in India, in a boost to Prime Minister Narendra Modi’s flagship Make in India programme.
Xiaomi announced that Foxconn Technology Group, the trade name for Taiwan-based Hon Hai Precision Industry Co. Ltd, the world’s biggest contract manufacturer, has started assembling phones for it at its facility in Sri City, an industrial park in Chittoor district of Andhra Pradesh.
Foxconn will initially be assembling a new device, Redmi 2 Prime. Xiaomi expects the contract manufacturer to eventually build its entire range of phones in Sri City. Neither firm disclosed the quantum of investment in the facility.
The Redmi 2 Prime, priced Rs.6,999, was launched on Monday.
The Foxconn facility will house a 100m assembly line for Xiaomi that will put together phones with components imported from China.
Over time, Hugo Barra, Xiaomi’s vice-president who oversees its operations outside China, expects the electronics component ecosystem to be created in India.
“We have chosen our highest volume product to manufacture locally,” Barra said at a media briefing in Visakhapatnam, Andhra Pradesh’s biggest city.
“Our being here solves the chicken-and-egg problem of component ecosystem,” he said, and added that he expects chargers, batteries and the “much more complex” memory units to be manufactured in India.
Local assembly will cut down costs, reduce lead time to make the phones and also help Xiaomi reap the economic and commercial benefits of the Make in India initiative. The lead time to produce a device will be reduced from 3-4 weeks in the case of China to two weeks in India, said Manu Kumar Jain, the head of Xiaomi Technology India Pvt. Ltd, the India unit of Xiaomi.
“It will gives us more speed,” Barra added.
Manufacturing locally will also ensure that the time taken to procure spare parts of damaged devices comes down “significantly”, making it easier for the company’s after-sales support. Besides importing components is “much, much more efficient (for customs clearance) than importing phones”, Barra pointed out.
Xiaomi has sold 3 million smartphones and tablets in India since July 2014, when it entered the country.
The company has no immediate plans for exporting the devices made in India, Jain said.
The Sri City unit will be Xiaomi’s second production hub outside its home base of China. It currently operates an assembly unit in Brazil. Like the India unit, the Brazil assembly facility also makes devices for the local market.
Xiaomi also has no immediate plans to make other products such as fitness bands or tablet devices in India, Jain added.
Foxconn is currently making phones at four assembly lines in its Sri City facility. It will eventually expand to 20 lines with a production capacity of 30 million units, a person with knowledge of the plant’s operations said requesting anonymity.
Foxconn will also make devices for other phone makers at the facility, the person said.
Xiaomi decided to go ahead with assembling phones at Foxconn’s Andhra Pradesh facility because of the presence of skilled technical manpower, and the speed with which the state government moved.
“It was kind of amazing to see a government leadership working like a start-up,” observed Barra. “That’s amazing in absolute terms… They just got the stuff done.”
“We believe this partnership will provide new opportunities to youth of the state and develop an electronics manufacturing ecosystem of global standards in Andhra Pradesh,” state chief minister N. Chandrababu Naidu said in a statement.
It is valued at $46 billion by Dow Jones VentureSource tracker and Wall Street Journal, making it the second most valuable start-up in the world.
“The primary motivation for electronic device and phone makers to manufacture locally is to escape the 12% duty structure imposed on imported phones,” Anshul Gupta, research director at technology research firm Gartner Inc., said.
“That’s why Micromax, Lava, Karbonn are all coming to make in India. That is the reason why Foxconn is also making in India. It sees demand for its services once these companies begin making in India,” Gupta said.
Assembling the devices in India makes a “huge difference” to manufacturing companies because of the differentiated duty structure. “It helps these companies in maintaining profitability and lowering the costs,” Gupta added.
Because the component ecosystem is not ready in India, the display and other hardware components need to be imported from markets such as China and Taiwan. “They should come (to India) depending on how the government supports other facilities and develops infrastructure,” he pointed out.