Founder and CEO Lei Jun, said that the company wants to replicate India's success in Indonesia, Russia, Ukraine and Vietnam, before making its way to the US. Jun, the 12th richest in China with a net worth of $6.8 billion, as per Forbes, however highlighted a number of challenges in its path, key among them being supply and manufacturing.
"Xiaomi India journey has been way beyond our wildest expectations and dreams. According to IDC we are number one in online. In last two quarters, out of three phones sold online, one is a Xiaomi phone," Jun, 47, told ET in an exclusive interview.
"Our biggest challenge has been supply and manufacturing. In our latest Redmi 4A sale, we sold 250,000 phones in just 4 minutes… This also means a lot of users who want to buy our products could not get our products and had a bad experience," he added, giving the supply-demand mismatch as the key reason behind the company ramping up manufacturing and opening its second plant.
Xiaomi has sold more than 4 million devices over last year. In March 2017, the company sold 250,000 units of the Redmi 4A priced at Rs 5,999, on Amazon.com within four minutes while getting over 1 million customers that have pre-booked the device.
The company which started making phones locally with Foxconn in Andhra Pradesh in 2015, recently expanded its capacity to make one phone per second, and now locally makes 95% of the phones it sells in India.
"Even with the new (second) plant, still short in supply," Jun added, indicating that the company would be keen to set up a third plant in India as well, thereby expanding capacity.
The company will expand manufacturing in India to resolve issues around shortage of supply in the face of high local demand. It may even look at exports from India.
"It's a possibility, we're still running out of stock of India. First fulfil Indian consumer needs before looking at exporting," he added.
Charting out Xiaomi's growth in offline market of China, Jun said, was the bigger challenge as the co mpany's reach and focus so far has been increasingly on the online market, which has its limitations. The challenge which is being seen in China, may also be seen in India in the years to come.
The other challenge that Jun pointed out was growing the share in the offline market, which will be dependent on adopting the internet and retail based efficiency model, used in online, for the offline market as well.
"If we look at overall market, online is a small piece. Our business model is all about efficiency so it's rather depended on how many people adopt the internet. In China after we have achieved such scale, the challenge is how we can achieve the same in offline with efficiency. In India, after we achieve more than 50% market-share in online space, the question is how to do the same in offline," Jun added.
The company is using the efficiency model to price the phones same for online and offline, despite the high cost of offline retail, thro ugh the Mi Home own stores that house its products, which it is trying to bring to India.
India is the biggest market for Xiaomi outside China. According to analyst firm IDC, Xiaomi India has become the number one selling smartphone brand in the online market, with 29.3%. It grabbed the No 2 position in smartphone segment as of December 2016, with 10.7% market share.
Manu Jain, Xiaomi India MD, added that the company's local focus will increase with more investments towards setting up local warehouses and expanding service centers. "We are setting up a third warehouse in Delhi NCR, we are doubling the number of service centres from 250 to 500 by the mid of this year."
Online and offline markets will contribute nearly equal shares to Xiaomi's sales in China in a couple of years, a balance that the company may achieve in India over time, Jun said, adding that the short term goal in India would be to grab about 50% share of the burgeoning online market. It has an over 30% share now.
Jun added that the company is keen to bring more of its ecosystem products to India, and is equally keen to invest in start-ups in India on his own - through Shunwei Capital - and through Xiaomi India. Last year, Xiaomi's China's internet services revenue surpassed $1 billion, while ecosystem business revenue we surpassed 15 billion RMB.
Xiaomi shot to the No 1 smartphone manufacturer in China and No 3 in the world in 2014, the same year it became the most-valued tech startup in the world at more than US$45 billion valuation. Jun added that the company's reported drop in valuation was speculation.
"In the past few years after hitting some of these obstacles we have intentionally slowed down and we want to build upon a stronger foundation… Even in the toughest years, like last year, we were actually able to achieve some growth," he said, adding that the company had a lot of cash and did not require any new funding at the moment.
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