Xiaomi Corp is revamping its strategy in India after falling behind due to its focus on budget phones, a mistake that let Samsung Electronics reclaim the market lead.
While Xiaomi concentrated on selling phones under 10,000 rupees ($120), Indian consumers were increasingly willing to pay more for premium features and stylish designs.
Samsung capitalized on this trend by launching aspirational products and innovative financing schemes, making these phones more accessible.
Data from Counterpoint Research reveals that Samsung captured a 20% market share in India for the last quarter of 2022, while Xiaomi slipped to 18%.
“The Indian market is witnessing a ‘premiumization’ trend. (But) Xiaomi has been caught underprepared for the shift with a budget phones-heavy portfolio,” said Tarun Pathak, a research director at Counterpoint.
Xiaomi’s weakening grip on India’s 626 million smartphone users highlights the risks companies face when they fail to adapt to evolving consumer preferences in a fast-growing economy.
As consumer demand shifts toward more expensive phones, companies like Meta and Apple, which focuses solely on high-end models, could benefit from the trend.
The market share of sub-$120 phones in India dropped from 41% in 2020 to 26% in 2022, while premium phones over 30,000 rupees ($360) doubled their share to 11%.
Both Xiaomi and Samsung view India as a crucial growth market, with smartphones as their top-selling electronic devices; Xiaomi posted $4.8 billion in revenue in 2021-22, while Samsung reached $10.3 billion, with $6.7 billion from smartphones.
Xiaomi has faced challenges in India, including executive departures, government scrutiny, and a financial investigation that led to $674 million of its funds being frozen for alleged illegal remittances, which the company denies.
A review of Xiaomi’s product listings shows a disconnect between market demand and its offerings: six models above $360 compared to Samsung’s 16, and 39 models under $120 compared to Samsung’s seven.
Premium phones represented just 0-1% of Xiaomi’s total shipments in India over the past two years, while Samsung’s high-end phone sales more than doubled, reaching 13%.
Xiaomi has acknowledged its mistake of launching “too many” models and is now shifting focus to the premium segment with new products like the Redmi Note 12 and Xiaomi 13 Pro, priced at 79,999 rupees ($970).
The Redmi Note 12 achieved $61 million in sales within two weeks of its launch, suggesting that the strategic pivot is gaining traction.
Xiaomi plans to streamline its product lineup, expand its retail footprint, and increase local sourcing of components to cut costs and boost competitiveness.
Samsung’s financing schemes have played a significant role in its resurgence in India, generating $1 billion in device sales in 2022, with options for those with no credit history or low scores.
Small towns are seeing a higher growth rate in premium phone sales than big cities, with almost half of the consumers using Samsung’s financing scheme being first-time loan seekers.
Xiaomi is also exploring similar financing partnerships and plans to grow its store presence beyond its current network of 20,000 retail partners.
Analysts believe that Xiaomi’s new strategy could help it rebound in India, leveraging its strong brand equity, established distribution channels, and a more balanced product mix.
“Xiaomi has historically enjoyed a strong brand equity, has a robust online and offline channel presence, and can spring a comeback with a potentially strong premium and value-for-money product mix,” stated Prabhu Ram, head of industry intelligence at CyberMedia Research.
