MUMBAI • China's Xiaomi Inc has joined forces with Taiwan-based tech giant Foxconn to start assembling phones in India, seeking to cut costs and grab a bigger slice of the world's third-largest smartphone market.
The factory, in the southern state of Andhra Pradesh, is a fillip for Prime Minister Narendra Modi, who is trying to turn India into a manufacturing powerhouse to boost economic growth and create much-needed employment.
India is the world's fastest-growing smartphone market, but a lack of good suppliers and infrastructure has hampered efforts to manufacture phones, forcing most of the country's more than 100 different phone companies to import from China and Taiwan.
From Monday, the south Indian assembly line began rolling out Xiaomi's first locally made smartphone, the Redmi2 Prime, an India-specific upgrade to its best-selling Redmi2 budget smartphone. It will be sold at 6,999 rupees (S$150), company executives said.
Neither Xiaomi nor contract electronics maker Foxconn disclosed the size of their investment or production capacity.
The Indian market, which Xiaomi entered in July last year, has fast become its second-largest as the company's low-priced phones find favour with young and cost-conscious customers.
In the April-June quarter, Xiaomi ranked seventh in terms of smartphone shipments in India - a segment that is dominated by Samsung Electronics and India's Micromax Informatics, according to Counterpoint Research.
Mr Manu Jain, Xiaomi's India head, said that apart from bringing tax benefits, the new facility would help the company better manage inventory and reduce lead times from three to four weeks to under two weeks. "Over time, most Xiaomi phones sold in India will be made in India," he said.
The number of smartphone users in India stood at around 140 million last year. It is expected to reach 651 million by 2019, according to a study by Cisco.
The assembly line marks a return to India for Foxconn, officially known as Hon Hai Precision Industry Co. The world's largest contract electronics manufacturer had to close shop in India last year after client Nokia stopped making phones at its plant. REUTERS