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China's Xiaomi Begins Making Smartphones in India

  • Anjana Pasricha

China's Xiaomi Redmi 2 smartphones are displayed to the media during their launch in Sao Paulo, Brazil, June 30, 2015.

China's Xiaomi Redmi 2 smartphones are displayed to the media during their launch in Sao Paulo, Brazil, June 30, 2015.

Chinese company Xiaomi has tied up with technology giant Foxconn to set up its first facility to make smart phones in India – the world’s fastest growing smartphone market. Foxconn has also announced other investments in India, giving a boost to Prime Minister Narendra Modi’s bid to turn India into a manufacturing hub.

Xiaomi’s Redmi2 Prime smartphone, priced at about $110, began rolling out from a factory in Sri City in southern Andhra Pradesh state this week.

The Chinese company entered the Indian market just a year ago, but since then price conscious consumers have snapped up 3 million phones, turning the country of 1.2 billion people into Xiaomi’s second largest market.

The company says it will benefit from tax breaks and be able to deliver phones more quickly.

As Xiaomi rolled out its first handset, Andhra Pradesh Chief Minister Chandrababu Naidu assured investors of an easier business environment.

“We have created [a single desk policy]. Within two weeks, all permissions will be given, you will not go to any office. Once you file an application, it will be our responsibility of our commissioner industries to give all clearances,” said Naidu.

Although consumers in the world’s third largest mobile phone market bought more than 50 million smartphones last year, most of them were imported from China and Taiwan.

That has prompted the Indian government to woo global electronic manufacturers to ramp up production in India.

The efforts are paying off. Besides assembling phones for Xiaomi, Foxconn - the world’s largest contract electronics manufacturer - has also announced a $5 billion investment in the western Maharashtra state to set up research and high tech manufacturing facilities. It says it will establish about 10 plants and employ a million people by 2020.

Most of Foxconn’s plants are in China. But analysts say a slowing domestic market and rising wages in Asia’s biggest economy are prompting companies to scout for alternate manufacturing bases.

To attract some of that investment, Prime Minister Narendra Modi has been promoting a “Make in India” campaign. He has been reassuring global companies long discouraged by the country’s notorious red tape and bureaucratic hurdles that he will make India an easier place to do business.

Economist Rajiv Kumar at the Center for Policy Research in New Delhi said the planned investments by Foxconn could give a shot in the arm to Modi’s plans to turn India into a manufacturing hub.

“Announcements like this shore up investor sentiment both from the domestic market and foreign investors. It will generate the necessary employment to absorb the additional workforce that comes into the labor market every month, every year, and ramp up the capacities in this country, and therefore turn the investment cycle, which has really been very weak so far,” said Kumar.

India has trailed other Asian countries in industrial production, but it has now set a target of increasing the share of manufacturing in its gross domestic product from about 16 percent to 25 percent.

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