Xiaomi Delays Overseas Push Amid Talks With Foxconn on Output

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Xiaomi Corp. Beijing Showroom
A customer looks at Xiaomi Corp. products at the company's showroom in Beijing, China. Xiaomi, which means millet in Chinese, was founded in 2010 to make software for mobile devices running Google’s Android operating system, and the company introduced its first smartphone in China the following year. Photographer: Brent Lewin/Bloomberg

Xiaomi Corp. is delaying aggressive plans to expand into five more countries this year as the Chinese smartphone maker talks with Foxconn Technology Group about boosting production of the low-cost devices.

Xiaomi and Foxconn are discussing making phones in India and Brazil, Hugo Barra, Xiaomi’s vice president in charge of global operations, said in an interview yesterday near New Delhi. Beijing-based Xiaomi, the world’s third-largest smartphone vendor, may also consider manufacturing in Indonesia, Barra said.

“Our focus is to add market-by-market, one market at a time,” Barra said. “Earlier this year, we talked about wanting to be in 10 markets within 2014. We realized that if we are to stay sharply focused, we can’t do that, so we scaled back.”

Founder and Chief Executive Officer Lei Jun pushed four-year-old Xiaomi beyond its home base this year into India, Singapore, Malaysia, the Philippines and Indonesia. That growth helped catapult the company past other domestic manufacturers in the third quarter to trail only Samsung Electronics Co. and Apple Inc.

Entry into Thailand, Russia, Mexico, Brazil and Turkey is postponed until next year, Barra said.

“They should be sure they have solid plans for the markets they do enter,” said Sandy Shen, a Shanghai-based analyst with Gartner Inc. “If time can buy them good performance in even fewer markets, that still makes sense.”

Foxconn Talks

Xiaomi doesn’t own any manufacturing capacity of its own and relies on contract manufacturers, including Foxconn’s FIH Mobile Ltd. and Inventec Corp., to build its phones. India will be a focus for years, which is why the company is looking to add manufacturing capacity there, Barra said after introducing plans for the local sale of the Redmi Note.

“We’d always be interested in listening to what our customers have to say,” Louis Woo, spokesman for Taipei-based Foxconn Technology Group said by phone yesterday. He declined to comment on Xiaomi or whether the two companies have any specific plans for India or Brazil. Foxconn unit Hon Hai Precision Industry Co. is the major assembler of Apple iPhones.

With India as its largest overseas market, Xiaomi could surpass both of the larger competitors to reach No. 1 within a decade, Lei said last week. India is a key market for Xiaomi as it works to boost users of its devices to 200 million from 70 million currently, Lei told the World Internet Conference in Wuzhen, China.

India Booming

Xiaomi started selling phones in India in July through a partnership with Flipkart.com, the nation’s biggest online retailer. That marked a departure from its China model, in which the company sold devices primarily through its own e-commerce site.

The smartphone market in India is projected to grow 38 percent next year, with future expansion remaining above 10 percent driven by devices that sell for less than $200, according to International Data Corp. To bolster India sales, Xiaomi in October said it added Jai Mani, a former Google Inc. executive like Barra, to its India team as lead product manager.

“Expansion in the Indian market is paramount to Xiaomi at this point,” Kiranjeet Kaur, a Singapore-based analyst at IDC, said in an e-mail. “India is one of Xiaomi’s biggest markets outside of China at this point and poised for strong growth over next few years.”

Xiaomi, which means millet in Chinese, was founded in 2010 to make software for mobile devices running Google’s Android operating system, and the company introduced its first smartphone in China the following year.

The company more than tripled global smartphone shipments to 17.3 million units in the third quarter, from 5.6 million a year earlier, IDC reported Oct. 29. Its market share more than doubled to 5.3 percent from 2.1 percent, the researcher said.

That ranked Xiaomi among the world’s top-three vendors for the first time, trailing only Suwon, South Korea-based Samsung and Apple in Cupertino, California.

Xiaomi is in talks for a funding round that values the closely held smartphone company at about $40 billion to $50 billion, people familiar with the matter said this month.

— With assistance by Bianca Vazquez Toness, and Edmond Lococo

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