While Mobile Manufacturing Booms In India, Chinese Smartphone Firm Xiaomi Finds Itself In Soup With Falling Profit

While mobile phone manufacturing in India has grown significantly over the past decade, reaching Rs 4.1 lakh crore, Chinese smartphone maker Xiaomi is facing notable challenges.

India currently manufactures 97 per cent of its total mobile phone demand domestically, with 30 per cent of the total production in the financial year 2024 intended for export.

Companies like Apple and Samsung have played a key role in boosting mobile phone exports from India to various markets including the UK, Netherlands, Austria, Italy, as well as the Middle East, North Africa, and South America.

In contrast, Xiaomi has faced difficulties, expressing uncertainty about its ability to continue as a "going concern" in its 2 May filing with the Registrar of Companies (RoC). The company cited ongoing regulatory and tax disputes, as well as the need for additional funds from its Chinese parent, as reasons for its challenges.

The RoC filing also revealed a steep drop in Xiaomi India's financials, with revenue from operations falling to Rs 26,697.18 crore in FY23 from Rs 39,099.68 crore in FY22. Net profit also plunged to Rs 238.63 crore from Rs 1,057.7 crore.

The company attributed its loss of Rs 1,875 crore before exceptional items and tax in FY23, compared to a profit of Rs 1,420 crore in FY22, to overspending on operations, particularly in expanding its offline retail presence where costs are higher.

Xiaomi has also faced several investigations and legal proceedings in recent years, initiated by income tax authorities, the Directorate of Enforcement, and the customs department. These investigations pertain to alleged evasion of customs duty and irregularities in royalty payments and is occurring amidst increased scrutiny of Chinese companies following heightened border tensions.

Despite Xiaomi's challenges, India has become the second-largest mobile phone producer globally, up from only two factories in 2014.

The PLI scheme has been instrumental in making India a competitive destination for electronics manufacturing, attracting leading global contract manufacturers such as Foxconn, Pegatron, Rising Star, and Wistron to set up production bases in the country. Samsung also operates its second-largest mobile phone factory in Noida.