Xiaomi is doubling down in India as competition intensifies

Xiaomi is getting an infusion of cash to ward off its local rivals.

After a slow 2015, Xiaomi bounced back last year to record $1 billion in revenue from India. The numbers highlighted a particularly profitable fourth quarter for Xiaomi — occurring around the time of demonitisation, during which a major chunk of high-denomination notes were devalued. The company's Redmi Note 3 turned out to be one of the best-selling devices of the year, and its successor, the Redmi Note 4, is continuing that momentum.

Xiaomi also opened its second manufacturing facility in India, and is now churning out a phone every second. The goal for the Chinese manufacturer is to solidify its footing in the Indian market, a task that's getting considerably harder owing to the increased competition in this segment. Xiaomi's local rivals OPPO and Vivo continue to steadily gain ground in India, and by targeting the same segment and selling their products at thousands of retail stores, they've managed to rise through the ranks in a relatively short time.

Xiaomi has learned from its mistakes in China, and is focusing on the offline segment in India.

Xiaomi saw a healthy 15.3% growth in the fourth quarter, edging past Lenovo to become the second-largest vendor for the three months ending in December 31. But with OPPO and Vivo making inroads into tier 2 and tier 3 cities and aggressively marketing their products, Xiaomi doesn't want the situation in India to play out the same way as it did in China.

To that effect, Xiaomi CEO Lei Jun has announced that the company would be investing $500 million in its Indian unit over the next three to five years. On a visit to India that included meeting Prime Minister Narendra Modi and reaffirming the company's commitment to the Make in India initiative, Jun said that Xiaomi was willing to take "controlled risks" in the country:

In the next two years we want more and more influence in India. We want to take more risks in India. But we want to take controlled risks.

Xiaomi's failure to focus on the offline segment in its home market allowed its rivals to gain much-needed momentum, but the company isn't repeating its mistakes in India. The Redmi Note 4 is going up for sale at thousands of offline retailers, and with the second factory up and running, Xiaomi is finally in a position to meet the ravenous demand for its devices. Whether it'll be able to sustain that demand is another matter altogether.