Xiaomi Opens New Plants in India

*Xiaomi has been building plants in India to sidestep import taxes

*More than 95% of the smartphones that the company sells in India are made in India

Smartphone-maker Xiaomi Inc. is opening three more production plants in India, racing to cement leadership in one of its most important markets.

The Beijing-based company, which also produces household items such as televisions and air purifiers, began building factories in India in 2015, in response to Prime Minister Narendra Modi's “Made in India” program and as a way to avoid import tariffs.

“To date, over 95% of Xiaomi smartphones sold in India are made in India,” the company said in a statement Monday. The new investments reflect Xiaomi’s localization strategy in the world’s second-largest smartphone market.

One of its existing plants in Noida, Uttar Pradesh, which produces power banks, now also makes smartphones, which means the company has a total of six phone-manufacturing plants in India.

Xiaomi made the announcement at its first supplier summit in India on Monday, a three-day event during which it hosted some 50 component suppliers to evaluate the investment environment and lobby them to set up factories in the country to help launch a so-called “Xiaomi ecosystem.”

Such collaborations could create an investment of over $2.5 billion and 50,000 jobs, the statement said.

Meanwhile, smaller rival Gionee Communication Equipment Co. Ltd. is reportedly in talks with the Indian government to open a manufacturing plant in Faridabad, in the northern state of Haryana.

In the fourth quarter of last year, Xiaomi accounted for 25% of the Indian smartphone market, according to Counterpoint Research, a market analysis firm. It unseated Samsung Electronics, which had a 23% share. China’s Lenovo Group Ltd., including the Motorola brand it acquired in 2014, ranked third with a 6% share.

Xiaomi was particularly disruptive in the second half of last year in India, launching an aggressively-priced portfolio and opening more channels for customer outreach, according to Tarun Pathak, associate director at Counterpoint Research.

“This helped Xiaomi surpass the long-time market leader, Samsung, for the first time ever. This performance ended Samsung’s six-year market dominance,” Pathak said in a statement.

Separately, India’s Economic Times reported Monday that Xiaomi is in “advanced talks” to pick up a stake in financial technology startup ZestMoney. ZestMoney has previously offered small loans to customers through Xiaomi’s online store.

This would be Xiaomi’s second investment in the Indian fintech space, after backing student-focused lender KrazyBee in an $8 million funding round in October, the report added.

Contact reporter Jason Tan (jasontan@caixin.com)