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Xiaomi to face production, product launch delays in India amid import scrutiny

Chinese smartphone maker Xiaomi Corp. could face production and product launch delays amid increased custom checks in India, analysts told S&P Global Market Intelligence.

India has reportedly held imports from China after the two countries were involved in a border clash in June. Companies including Hon Hai Precision Industry Co. Ltd., known as Foxconn, suspended production due to the delay of material imports, according to a July 2 Reuters report. Foxconn assembles phones for Apple and Xiaomi.

The India Cellular and Electronics Association, a group which represents companies including Apple, Nokia, Oppo, Xiaomi and Vivo, said import agents were examining each shipment, according to a Financial Times report.

Withholding of China imports has delayed component supplies from ports to factories, which has impacted the production for all Chinese original equipment manufacturers including Xiaomi, according to analysts. Xiaomi declined to comment.

“Xiaomi and other Chinese phone makers are running on very low or no inventory for their new models and this will significantly impact production and business in India for July at least,” Navkendar Singh, research director of devices and ecosystem in India and South Asia at IDC, said. He noted that Xiaomi was already facing production, logistics and sales disruptions from India’s COVID-19 lockdown that went into effect earlier this year.

Xiaomi has seven factories in India where roughly 99% of Xiaomi handsets sold in the country are made, according to a CNBC report, which cites an interview with Xiaomi’s global vice president and managing director of India, Manu Kumar Jain.

An “unclear production road-map” in India also means Xiaomi’s key product launches and marketing strategies will “make less sense,” IDC’s Singh added.

Xiaomi has made a string of announcements regarding product launches for India this year.

The Chinese phone maker debuted its latest laptop product Notebook 14 in India on June 11, according to Live Mint. Xiaomi also launched its Mi 10 smartphone series in the country in May, according to a Gadgets report. In March, Xiaomi announced its ninth generation Redmi Note series smartphone in India.

The impact on Xiaomi’s marketing strategies in India will further dent its branding and consumer appetite, given recent tensions between India and China, Prachir Singh, senior research analyst at Counterpoint said. To build their brands, Chinese companies like Xiaomi have been quick to promote a “Made in India” campaign, he added.

Stating that Xiaomi employs 50,000 people in India and that it has product and leadership teams based in the country, the company’s Manu Kumar Jain said in a June 20 Twitter post: “We are more Indian than anyone.”

The company can also look at making longer-term investments in India such as providing jobs in manufacturing and scaling local research and development teams to insulate itself from the ongoing geopolitical issues, Counterpoint’s Singh said.

However, analysts say given India’s price-sensitive consumers, it will be hard for non-Chinese alternatives like Samsung Electronics Co. Ltd. and Apple Inc. to replace players like Xiaomi in the smartphone segment.

Xiaomi has been aggressive about global expansion, placing more focus on India, which contributed around 20% of Xiaomi’s revenues in the first three months of 2020, according to a rough estimate by Dan Baker, director of equity research at Morningstar.

In India’s smartphone segment, Xiaomi has dominated the market for 11 consecutive quarters, according to Counterpoint data. S&P Global

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