Xiaomi’s slow shift in India to premium smartphones is helping Samsung steal its crown

  • Samsung, Xiaomi stand ahead in India as premium phones in focus
  • More Indians now want expensive phones with better features
  • Affordable smartphones under $120 are losing popularity data
  • Samsung loan scheme drives purchase of premium phones-executive

NEW DELHI/LUCKNOW, March 16 (Reuters) – Xiaomi Corp is overhauling its India strategy after misjudging consumer tastes in mobile phones, a costly error that has allowed Samsung Electronics to oust the Chinese company to the top position in the world’s second largest market for the devices.

While Xiaomi remained focused on selling mobile phones under 10,000 rupees ($120), Indian consumers were willing to pay for better-looking models with richer features. South Korea’s Samsung launched products to meet these expectations and offered innovative financing schemes that made them affordable for most.

Those moves have helped Samsung ( 005930.KS ) wrest leadership of India’s competitive mobile phone market from Xiaomi ( 1810.HK ), with data from Hong Kong-based Counterpoint Research showing it had a 20% market share in last quarter of 2022 compared to the Chinese company’s 18%.

“The Indian market is witnessing a ‘premiumisation’ trend. (But) Xiaomi has been caught underprepared for the shift with a budget phone-heavy portfolio,” said Tarun Pathak, director of research at Counterpoint.

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The loosening of Xiaomi’s vise-like grip on India’s 626 million smartphone users – the second largest after China – shows how companies that fail to cater to changing consumer preferences in a fast-growing economy with rising disposable incomes are being punished.

Most famously in India, Tata Motors’ ( TAMO.NS ) 100,000 rupees ($1,200) Nano, billed as the world’s cheapest car, was shunned by consumers who associated the low price with inferior quality.

Indians’ push for more expensive cellphones to consume videos and other content will also benefit social media providers such as Meta ( META.O ) and iPhone maker Apple Inc ( AAPL.O ), which so far have a small market share in the country due to of its sole focus on high-end phones, priced from $605 to as high as $2,304, according to its website.

According to Counterpoint, the market share of sub-$120 phones in India fell to 26% by 2022 from 41% two years ago. And premium phones – priced above 30,000 ($360) – saw their share double to 11% over the same period.

Xiaomi and Samsung both count India as a key growth market, with smartphones their best-selling electronic device. The Chinese company recorded total revenue of $4.8 billion in 2021-22 in India, while Samsung recorded $10.3 billion in sales, of which $6.7 billion came from smartphones.

However, Xiaomi is already facing heat in India due to the departure of at least five senior executives and increased government scrutiny amid frosty relations with neighboring China. The company has had $674 million of its funds frozen by the country’s Financial Crimes Agency for alleged illegal money transfers to foreign entities, which Xiaomi denies.

A Reuters check of product listings on Xiaomi’s website showed the mismatch between consumer needs and the products the company has offered. Xiaomi showed six smartphones priced above $360, compared to Samsung’s 16. Under $120, Samsung had seven models, while Xiaomi listed 39 — most of which turned out to be sold out.

And premium phones accounted for just 0%-1% of Xiaomi’s total Indian phone shipments in the past two years, with Samsung’s high-end phones more than doubling their share to 13%, Counterpoint data showed.

But Xiaomi, which has admitted that it has introduced “too many” models in the past, is revamping its product range to focus on premium smartphones.

It launched in January the Redmi Note 12, whose top-end variant is priced above 30,000 rupees, and more recently the Xiaomi 13 Pro at 79,999 rupees ($970) — its highest-priced phone in India. The strategic shift seems to have paid immediate dividends, with the Redmi Note 12 clocking in at $61 million in revenue within two weeks of its launch.

“We have laid out a streamlined and cleaner portfolio with a focused approach to build excellence in the premium segment, and the launch of our latest flagship, the Xiaomi 13 Pro, is a step in that direction,” said India President Muralikrishnan B.

“We understand that we have a long way to go on this journey, which is why we are bringing in much stronger products.”

How Samsung earned India’s market leader crown


A Samsung scheme, run with its financing partners that it says offers “convenient and safe” loans, played a significant role in its recent success in India, helping generate $1 billion in unit sales last year.

A poster of Samsung’s offer seen by Reuters on a dusty street used by fruit sellers in Uttar Pradesh state said even those with no credit history, low credit scores or paychecks could get a phone.

Sanjeev Kumar Verma, owner of a nearby multi-brand phone store, has benefited from the company’s loan scheme. Speaking to Reuters at his shop, where hundreds of phones are stacked on shelves, Verma said he used to sell five Samsung phones every month but has quadrupled that to 20 now, 18 of which are through the loan scheme.

Verma and another smartphone vendor in Mumbai said that unlike competitors, Samsung did not require local proof of address, making it easier for migrant workers or those working outside their home state to acquire phones on loan. Samsung did not comment on the remarks from the suppliers.

Growth in premium segment phones was much higher in small towns than in big cities, Samsung’s India mobile head Raju Pullan told Reuters in February, adding that nearly half of consumers who opted for its financing scheme were first-time loan seekers.

Samsung says its finance app installed on smartphones can lock the device and block outgoing calls for missing loan payments.

Xiaomi has also tapped partnerships to offer loans, calling them a key growth driver for sales of phones priced above 15,000 rupees ($183), adding that it will explore more such offers.

Muralikrishnan said the company will also open more stores beyond its current network of 20,000 retail partners and increase local sourcing of mobile phone parts, which is likely to reduce costs.

Some industry analysts said the new strategy could help the Chinese company return to solid growth in India.

“Xiaomi has historically had strong brand equity, has a robust online and offline channel presence and can make a comeback with a potentially strong premium and value for money product mix,” said Prabhu Ram, head of industry intelligence at CyberMedia Research.

Reporting by Munsif Vengattil and Aditya Kalra in New Delhi; Editing by Muralikumar Anantharaman

Our standards: Thomson Reuters Trust Principles.

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