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Xiaomi bets big on India despite problems

Xiaomi of China emerged as the third largest maker ofsmartphones after Samsung and Apple in the quarter ended September 30, according to International Data Corporation. It reported 211 per cent growth in sales for the quarter in 2014, even as Samsung reported a drop of 8.2 per cent and Apple an increase of only 16 per cent. The final battle for supremacy will be fought in India, the world’s second-largest market after China, which Xiaomi entered in July through a tie-up with online retailer Flipkart. By the end of October, it had sold over half a million smartphones in flash sales that got over in a few seconds. That might still be small – smartphone and feature phone sales were 72 million in the July-September 2014 quarter, according to IDC – but none of Xiaomi’s rivals is taking it lightly.

What could stop Xiaomi’s march forward is something else. In October, the Indian Air Forces asked its personnel and their families not to buy Xiaomi smartphones because of security concerns. Within a few days, Xiaomi announced that it would set up a data centre in India in 2015 to store local user data. But its troubles seem to continue. In the second week of December, the Delhi High Court restrained Xiaomi from selling handsets that run on technology patented by Ericsson of Sweden in the country. Within days, in an open letter to Indian consumers, Hugo Barra, Xiaomi’s global vice-president, said: “We have been forced to suspend sales until further notice due to an order passed by the Delhi High Court. As a law-abiding company, we are investigating the matter carefully and assessing our legal options.”

Xiaomi explained its position to the Delhi High Court last week. It said it has a direct contract with chip-maker Qualcomm for some of the technologies that it uses in its devices, and there could have been cross-licensing arrangements that patent holders have among each other. Following this, the Delhi High Court, in an interim order, allowed Xiaomi to sell those smartphones in India built on Qualcomm chipsets. However, the company will have to deposit Rs 100 for every handset sold towards royalty as part of a temporary measure. The Delhi High Court will hear the case again on February 5. “Xiaomi will have to settle with Ericsson on this matter and find an amicable solution. This also means Xiaomi will have to slightly tweak its cost structure and arrangement with suppliers to neutralise the extra intellectual property costs,” says Neil Shah, research director (devices & ecosystems), CounterPoint Research.

India is the second most important market for the Chinese company, says Xiaomi India Country Manager Manu Jain. For Xiaomi, 2015 is set to be the year of expansion in India. “We’ll bring almost all the smartphone models that we sell in China. Not just smartphones, we will expand our portfolio here as much as possible. Till now, we have just scratched the tip of the iceberg here,” adds Jain. Besides expanding its smartphone portfolio in India, Jain says Xiaomi will bring its high-end smart televisions in India and look at new product segments like air purifiers. “We are also working on reducing the lead time,” he adds. At present, the company brings devices in India about two months after it launches them in China.

Adopted from – Business Standard

December 24, 2014

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