Xiaomi Corp is reviewing its India strategy after misjudging consumer tastes for mobile phones. This costly mistake allowed Samsung Electronics to lead the Chinese company to the top spot in the world’s second-largest market for these devices.
While Xiaomi continued to focus on selling mobile phones below Rs 10,000 ($120), Indian consumers were willing to pay more for better-looking models with richer features. Samsung of South Korea launched products that met those aspirations and offered innovative financing schemes that made them affordable for most.
These measures have helped Samsung take the lead of the Indian mobile phone market from Xiaomi. Data from Hong Kong-based Counterpoint Research shows that Samsung had a market share of 20% in the last quarter of 2022, compared to 18% for the Chinese company.
“The Indian market is witnessing a ‘premiumization’ trend. (But) Xiaomi is underprepared for this shift with a portfolio full of cheap phones,” said Tarun Pathak, research director at Counterpoint.
The loosening of Xiaomi’s grip on India’s 626 million smartphone users – the largest after China – shows how companies that fail to respond to changing consumer preferences are penalized in a fast-growing economy with rising disposable incomes.
Best known in India is Tata Motors’ Rs 100,000 ($1,200) Nano, which was heralded as the world’s cheapest car, shunned by consumers who associated its low price tag with inferior quality.
Indians’ demand for more expensive mobile phones to consume videos and other content is also beneficial for social media app providers like Meta, and iPhone maker Apple Inc, which so far has a small market share in the country as it focuses exclusively on high-end phones, with prices ranging from $605 to a whopping $2,304, according to its website.
According to Counterpoint, the market share of the phones under $120 in India has fallen to 26% by 2022, from 41% two years ago. And premium phones – above 30,000 ($360) – saw their share double to 11% over the same period.
Xiaomi and Samsung both view India as a major growth market, with smartphones being their top-selling electronic device. The Chinese company posted a total revenue of $4.8 billion in India in 2021-22, while Samsung posted $10.3 billion in revenue, of which $6.7 billion came from smartphones.
However, Xiaomi is already struggling in India with the departure of at least five top executives and increased government scrutiny over frosty relations with neighboring China. The company has had $674 million frozen by the country’s Financial Crime Bureau over alleged illegal remittances to foreign entities, which Xiaomi denies.
A Reuters review of the product listings on Xiaomi’s website revealed the mismatch between consumer needs and the products the company offers. Xiaomi had six smartphones priced over $360, compared to Samsung’s 16. Under $120, Samsung had seven models, while Xiaomi had 39 – most of which turned out to be out of stock.
And premium phones accounted for just 0%-1% of total shipments of Xiaomi’s Indian phones over the past two years, while the share of Samsung’s more expensive phones more than doubled to 13%, according to data from Counterpoint.
But Xiaomi, which has admitted to introducing “too many” models in the past, is revamping its product line to focus on premium smartphones.
In January, the company launched the Redmi Note 12 with a top price of over Rs 30,000, and recently launched the Xiaomi 13 Pro at Rs 79,999 ($970) – its most expensive phone in India. The strategic shift seems to have paid off immediately, as the Redmi Note 12 posted sales of $61 million within two weeks of its launch.
“We have established a streamlined and cleaner portfolio with a focused approach to build expertise in the top segment, and the launch of our latest flagship, the Xiaomi 13 Pro, is a step in that direction,” said Indian President Muralikrishnan B.
