While Xiaomi now aims to challenge Apple in the fastest-growing smartphone market in the world, the story of the two in India is surprisingly similar in many ways.
Two giants in the premium smartphones category - Apple and Samsung - now have a new challenger in India.
Xiaomi - the world's fifth largest smartphone company - on Thursday unveiled its flagship Mi5 handset, priced at Rs 24,999, with an aim to capture the fast growing premium smartphone segment.
Xiaomi is also in talks with several content developers and service providers to set up a software ecosystem in India, said Hugo Barra, vice-president, Xiaomi Global.
While Xiaomi now aims to challenge Apple in the fastest-growing smartphone market in the world, the story of the two in India is surprisingly similar in many ways.
While Xiaomi has already started manufacturing handsets at its assembly line in the Foxconn plant in Hyderabad, Apple chief executive Tim Cook recently indicated that the Cupertino-headquartered technology major was also planning to manufacture in India.
Apple iPhones have gained traction in the past two years and currently hold the top slot in the above-Rs 20,000 segment with 42 per cent market share, according to IDC.
Both are focusing on expanding their offline distribution in India since 2015 and have recently applied for permission to open company-owned retail stores in the country.
"I believe we belong to the above-Rs 20,000 ($300) category which is currently dominated by the two players (Apple and Samsung). Mi5 is aimed at gaining traction in that price segment here," Barra said.
This means that manufacturing premium smartphones locally may not be viable for Xiaomi.
The Chinese company currently procures a few models in India and is planning to add two assembly lines. It is currently in talks with suppliers in China to set up shops in India, Barra said.
Local manufacturing helps mobile companies in cutting down working capital.
"It takes about five weeks to procure devices from China but if we manufacture locally, that comes down to 14 to 18 days," said Manu Kumar Jain, general manager and head of India operations, Xiaomi.
Xiaomi started offering its smartphones through offline channels only last year through The MobileStore, Airtel stores and Redington.
Many Indian consumers still prefer to touch and feel the product before buying it.
While the company started offline distribution in southern India, it is setting up a pan-India offline distribution network, said Barra.
Xiaomi currently sells about 10 per cent of its devices offline and aims to take this to 30 per cent in the next couple of years.
Globally, it sells most of its smartphones at manufacturing cost and generates profits through services and content, including video streaming.
This model helps Xiaomi offer its handsets at a lower price than competitors.
In India, the lack of relevant content forced Xiaomi to adopt a 'direct to retailer' model of distribution.
To cut down distribution costs, Xiaomi has appointed Redington to supply smartphones directly to retailers.
Apple also distributes majority of its products in India through Redington.
"Xiaomi has been able to double its shares in almost all the segments of the market which is attributed to the devices being available at the right price points," said Faisal Kawoosa, general manager, telecom & semitronics, CMR said.
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