Xiaomi to dive into India's premium smartphone market. Will it survive?

Xiaomi will finally start launching premium Mi-branded flagship smartphones in its biggest market, India. The Chinese company has firmly planted its roots in the country by creating a strong demand for its budget smartphones. It now feels time has come to introduce more premium devices in the Indian market starting this year.

Speaking to Gadgets 360 and Digit in separate interviews, Xiaomi India’s Head of Categories, Raghu Reddy confirmed the development. He said, “We (Xiaomi) believe the market is significantly bigger than what it was two or three years ago for us to start treating the segment as a big enough opportunity to go after.”

Xiaomi’s Mi-branded flagship phones have largely been restricted to the Chinese and European markets till now. The last Mi-branded flagship to launch in India was the Mi Mix 2 back in 2017. Since then, the company has launched a number of Mi A series smartphones in India. However, Its focus in the country has largely been restricted to the affordable Redmi series.

India is a price-sensitive market. The demand for smartphones priced around $200 or less is significantly higher than mid-range or premium devices. This is why Chinese smartphone makers with a tendency to launch affordable devices control more than 67% of the Indian smartphone market. Why then does Xiaomi want to go premium? Here are some theories we have.

Xiaomi’s declining market share in China

“Going into 2020, we are now organising ourselves in such as a way as we are organised in China where there is a distinct focus on Redmi as a sub-brand and a distinct focus on Mi as a sub-brand,” Reddy told Digit.

The fact of the matter is that Xiaomi has lost a chunk of its market share in China to HUAWEI. Since its US trade ban, HUAWEI has ramped up focus on the Chinese market and seen significant gains by doing so. In comparison, Xiaomi’s China sales declined 38% in Q3 2019 compared to the previous year. Counterpoint research notes that the reason for Xiaomi’s drop in its home market was an onslaught of launches from HONOR, OPPO, and vivo.

India, on the other hand, is a growth market for Xiaomi. The brand has consistently remained on top of the food chain for consecutive months. However, competition from Samsung’s A series devices as well as Realme’s unrelenting launches could change those dynamics in 2020.

Xiaomi’s plan to bring Mi-branded flagships could help the company maintain its stronghold in India. It’ll also help the brand take on high-end flagships from the likes of OnePlus and Samsung, as well as offset falling demand in China.

India’s increasing buying potential

Xiaomi believes that its move to bring Mi flagships to India makes sense because people are now ready to pay more for smartphones. Reddy claims the Average Selling Price (ASP) of phones in India is increasing.

IDC data also points to a similar increase in demand for $300 – $500 smartphones in India. The price category grew the fastest in Q3 2019. So things do seem to be working in Xiaomi’s favor as far as its entry into the premium segment is concerned.

“Will there be a bit of overlap between Mi and Redmi? Yes,” Reddy told Gadgets 360. “But does that mean that Mi will get into the affordable territory? Probably, no,” he added.

Xiaomi’s desire to compete with OnePlus, Samsung, and realme

Xiaomi has tried the flagship game in India in the past. It did so with the high-end POCO F1 and the Redmi K20 Pro. However, the company couldn’t match up to competition from OnePlus and Samsung in those price segments.

To add to Xiaomi’s worries, realme is right on its heels, consistently gaining market share thanks to its strategy of launching phones in each price bracket.

Considering these factors, Xiaomi needs to make a big move before it loses its largest customer base to another brand. Market analysts believe launching premium flagships is the way to go.

“I think this is a good step especially when globally Mi flagships are perceived as premium for Xiaomi users,” Tarun Pathak, Associate Director, Counterpoint Research, told Gadgets 360.

Given all these factors, it looks like the first Mi branded flagship to come to India could be the upcoming Mi 10. Xiaomi has already confirmed that the Mi 10 and Mi 10 Pro will be premium devices running on the Snapdragon 865 SoC. Will the price conscious Indian buyer accept an expensive Xiaomi device? Only time and sales will tell that story.