Xiaomi navigates stormy seas in India as Chinese brands face legal troubles and changing consumer trends

Xiaomi is adjusting its strategy in India after changing consumer preferences and increased regulatory scrutiny have seen the Chinese smartphone maker’s market leadership evaporate. Xiaomi India’s market share fell to 15 per cent in the first half of 2023, down from a market-leading 28 per cent in 2018, according to data from technology market research firm Counterpoint Research. “The dynamics of India’s smartphone environment have changed significantly, with the main factor being increased consumer wealth,” said Tarun Pathak, research director of devices and ecosystems at Counterpoint. Pathak said that a “premiumisation trend” has benefited pricier brands such as Apple and Samsung Electronics, with the South Korean player now India’s top smartphone supplier with 19 per cent of the market, according to Counterpoint. Smartphone giant Xiaomi pushes bricks-and-mortar retail expansion in India “Players like Xiaomi are more mass market focused, and while India is a huge country … [that market] has started to shrink as the premium market grows,” added Pathak. Samsung South West Asia CEO JB Park said on Wednesday in an interview with local news outlet The Economic Times that India’s fast-paced population and digitalisation growth are promising market drivers. On the same day, Samsung launched its latest foldable phone, which according to Park, is catching on among India’s youth. Major Chinese brands like Xiaomi have released their own foldable phones with mixed results, according to Counterpoint data. Xiaomi India has signalled a recalibration of strategy. In a recent Bloomberg news report, president Muralikrishnan B said the company would slim down its phone offerings to better focus on 5G offerings, customer experience and targeted sales through physical retail stores. On Tuesday, Xiaomi India’s chief marketing officer Anuj Sharma tweeted that the company is “correcting some of the mistakes we’ve made” and had already made its formerly “confusing and cluttered” portfolio leaner ahead of a “pending 5G revolution” in the country. According to Pathak, providing better after-sales services, opening physical locations, and using local distributors are some of the steps other China-based competitors such as Vivo and Oppo have already taken to defend market share in the country. Vivo overtook Xiaomi’s market share in India for the first time this year, according to Counterpoint data. Despite Xiaomi’s troubles, the total smartphone market share of Chinese-owned companies in India remains strong, sitting at about 74 per cent in the first half of this year, up from 60 per cent in 2018, according to Counterpoint. Xiaomi to fight on in India in battle to recover frozen funds However, ongoing regulatory scrutiny in India remains an issue. Earlier in the month, Indian authorities raided Vivo’s offices and seized assets worth US$59 million at the time from Vivo bank accounts, accusing it of channelling profits outside the country to avoid taxes. Vivo did not immediately respond to a request for comment on the matter. It followed a similar case last year where India’s federal financial crime agency, the Enforcement Directorate, accused Xiaomi of years of suspicious remittance payments to three foreign-based entities, seizing funds worth more than US$600 million – a decision that Xiaomi has tried and so far failed to overturn. Last week, India’s Ministry of Electronics and Information Technology further disclosed details of a comprehensive probe into alleged tax evasion by Chinese phone manufacturers, alleging that about US$1 billion of taxes had been unpaid since 2017. The Ministry said tax authorities had recovered 18 per cent of this so far. “We remain resolute in our commitment to uphold local laws and regulations of the country. We are actively cooperating with the relevant authorities to address any questions or concerns,” Xiaomi India told the Post on Friday. India has taken a tougher stance on Chinese tech companies over the past few years, having banned hundreds of Chinese apps and barred Chinese telecoms equipment makers Huawei Technologies and ZTE from participating in 5G trials in the country. However, even if tax evasion findings by the Indian government result in additional fines or increased legal troubles for Chinese phone manufacturers in India, the companies will likely treat this outcome as a pay-to-play issue in a lucrative market, according to Counterpoint’s Pathak. “They will quickly try to settle these legal distractions, so they can start focusing on the larger trends happening in the market,” said Pathak, adding that some of the companies may opt to further localise business operations to appease government concerns. Muralikrishnan B, however, recently told the Times of India that Xiaomi is not looking at any joint venture with an Indian firm, despite production-linked government incentives on offer for such a move. Of India’s population of about 1.4 billion people, only about half have smartphones, representing a unique market still driven by a lot of first-time smartphone users, according to Counterpoint. “That’s why you will continue to see an increased focus on India from all global tech giants,” said Pathak.