Xiaomi’s domestic manufacturing plans are set to get a major boost with one of its key components suppliers, Holitech, finalizing plans for a new plant at Tirupati with an investment of $200 million (Rs 1400 crore) over three years, a move which will help the Chinese handset maker reduce prices of its devices further.
Holitech Technology, which provides components to the world’s top five brands, excluding Apple, on Monday signed a Memorandum of Understanding (MoU) with the Andhra Pradesh government for a plant to be based on 75 acres of land, its first major expansion outside China.
The Chinese component maker, one of the 50 such to be invited by Xiaomi to India in April this year, will locally produce camera modules, touch screen panels, TFT (thin film transistors), flexible printed circuits and fingerprint modules exclusively for Xiaomi, starting January 2019, company Chief Executive Flame Chen told reporters.
Xiaomi India head Manu Kumar Jain said that the local sourcing of these components will help reduce the prices of its smartphones in India. “From moving from assembling to making components in India will give a push to Make in India program”.
He added besides prices, Xiaomi’s increasing the use of locally sourced components in India will also help reduce the time to go to market.
Jain added that Xiaomi is in “advanced stages” of talks with other component suppliers to come to India to support its operations. “We will buy components from other local players if quality meets its standards”.
Xiaomi is locked in an intense battle with South Korea’s Samsung for the top slot in the highly competitive and price sensitive Indian market, the world’s second largest after China. After two quarters of being at the top, Xiaomi ceded the position to Samsung in the April-June quarter. This, despite shipping some 10 million smartphones in that quarter, it’s best performance till date in India, according to Counterpoint Research data.
Chen said that the company, which has 16 factories in its home base, is looking to produce exclusively for Xiaomi for now. “We may look for other partners in future, but not now.”
He said that the new plant, which will create 6000 new local jobs, will produce 50 million components each year under the phase 1. By the end of the phase 2, which will end within three years, the company will make 100 million units of each components.
He added that the company is expecting $2 billion in revenue from India from its supplies to Xiaomi. “$1 billion in revenue can be achieved within first year of operations,” he added. The company expects to clock $4 billion in revenue overall this calendar year.
Xiaomi on its part, already has six manufacturing facilities for smartphones and one unit for power banks spread across Andhra Pradesh, Tamil Nadu and Noida (UP). It recently started its first-ever SMT (Surface-mount technology) plant in collaboration with Foxconn, to begin printed circuit board or PCB assembling in Sriperumbudur, Tamil Nadu.
Chen said that Holitech will now persuade its other suppliers to set up facilities in India as well, that will give a push to overall component ecosystem.
“This is first our major investment outside China. Now, we plan to expand, and will follow Xiaomi recommendation to expand in South East Asia,” he said.