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Xiaomi continues to face hurdles in India

After a 41 per cent plunge in its smartphone shipments in India last quarter, Xiaomi continues to face hurdles in what has become one of its biggest markets outside China amid geopolitical tensions that have resulted in heightened scrutiny of Chinese technology firms.

Once the top smartphone brand in India for five straight years, Xiaomi ranked fourth in the first quarter with shipments of 5 million handsets, making up 16.4 per cent of the market, according to the latest figures from IDC last week. That was down from 8.5 million units in the same period last year, when the Beijing-based smartphone giant was still the No 1 player in the market.

“The shipment decline of Xiaomi was mainly because the vendor was focusing on clearing its inventory amid weak consumer demand locally,” said Will Wong, an analyst at IDC. “Nevertheless, this is a good move as this short-term, painful plan is expected to bring a more resilient structure, especially since profitability and cash are crucial in the uncertain environment.”

Xiaomi’s struggles come in part from sinking smartphone sales in general, both globally and in India, as consumers hold onto devices longer. In India, smartphone shipments fell 16 per cent in the first three months of the year to 31 million units. Samsung led the quarter with 6.2 million units, followed by Chinese brands Vivo and Oppo.

However, Xiaomi has been hit especially hard by deteriorating relations between the world’s two most populous countries.

An Indian High Court last month rejected a plea from Xiaomi to return funds worth more than US$676 million, which were seized in April 2022 after India’s federal financial crimes agency said it uncovered years of suspicious remittance payments made by the company’s local arm to three foreign entities. Xiaomi has denied the accusations.

Since a deadly 2020 border clash between Chinese and Indian forces, New Delhi has put increasing pressure on Chinese tech companies. The government has banned dozens of Chinese apps and kicked off probes into companies including Xiaomi, Vivo and Huawei Technologies.

“Xiaomi has a lot on its plate in India, and it will be more cautious in making investments in marketing and sales channels this year,” said Ivan Lam, a senior analyst at Counterpoint Research. “The Indian government’s scrutiny will continue to take its toll on Chinese businesses in general, as well as other foreign firms including Samsung.”

Xiaomi still led the Indian market for all of 2022, but the last two quarters show its fortunes could be changing. Samsung Electronics rose to the top spot in the fourth quarter, while Vivo came in second, according to data from research firms Counterpoint and Canalys.

In the first quarter this year, Xiaomi faced weaker demand in the lower-end segment and online sales channels, Counterpoint said in a recent report. It estimated an even steeper decline than IDC, saying Xiaomi shipments fell 44 per cent in India for the period, the largest ever for the company.

India’s smartphone market could also see greater competition as Apple expands in the country. Counterpoint’s Lam noted that Xiaomi, which targets the low- and mid-tier market segments, is not in direct competition with the iPhone maker. But Apple CEO Tim Cook said in a recent earnings call that he is “hopeful” that the company can convince some consumers in India’s rising middle class to buy iPhones.

Cook visited India last month for the opening of Apple’s first two retail outlets in the country, as the company seeks to capitalise on rising incomes and consumer spending. That comes amid efforts to diversify its supply chain away from China, with sales of iPhones assembled in India up 65 per cent last year. South China Morning Post

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