Aims to build local ecosystem, but analysts warn of losing focus
Chinese smartphone maker Xiaomi Technology Co has led a $25 million investment into Hungama Digital Media Entertainment, an entertainment content provider in India, marking Xiaomi's first investment in an Indian company, according to a press release Xiaomi sent to the Global Times on Tuesday.
Xiaomi said it will participate in the funding round along with Hungama's existing investors - Intel Capital, Bessemer Venture Partners and Indian billionaire Rakesh Jhunjhunwala. The company didn't disclose the size of the stake it will take in the Mumbai-based company.
"After China, India has become the most important market for Xiaomi, as smartphone sales growth in India is very fast," Wang Yanhui, head of the Shanghai-based Mobile China Alliance, told the Global Times on Tuesday.
"Compared with India, the Chinese smartphone market is getting saturated. That's a major reason why so many domestic smartphone makers including Lenovo, Huawei, VIVO and Xiaomi all want to expand in the Indian market."
India may also be an easier target. Larger domestic smartphone makers like Huawei and ZTE expanded into the US and Europe, where they established themselves long ago, and smaller companies like Xiaomi can't compete with them in those places, Li Yi, deputy director of the Internet Plus research center of the Beijing-based Internet Society of China, told the Global Times on Tuesday.
Even in India, however, Xiaomi faces fierce competition, said Li.
Xiaomi is the No.7 smartphone vendor in India, with a 3.5 percent market share in the fourth quarter of 2015, according to a report by US-based research firm International Data Corp (IDC) on March 4.
Samsung was No.1 during the period, holding 29.4 percent share within the top 30 cities in India, followed by Micromax, Lenovo (Motorola), Intex, Lava and Apple, said the IDC report.
"Xiaomi is trying to build a sound ecosystem in India, meaning that it can enjoy a favorable image among Indian people through cooperation with local companies," said Li.
Xiaomi's investment in Hungama won't raise its smartphone sales directly during the short term, but it's an important way to boost its presence in India, noted Li.
In April 2015, Xiaomi received investment from the chairman emeritus of Indian conglomerate Tata Sons, which raised its profile in the Indian market. But Xiaomi didn't reveal financial details of the deal.
Lei Jun, founder and CEO of Xiaomi, sees India as a major target market this year. He said that he hopes to move into the top three as soon as possible in the Indian market, according to a report by The Wall Street Journal on March 6.
Lei has also called India an "experimental field" for the company's global expansion, the Xinhua News Agency reported on March 7.
But Li voiced concern over Xiaomi's diversification into many unrelated sectors such as toys and unmanned aerial vehicles (drones).
Xiaomi emphasized that it's been an Internet company from the very start, and that's one reason it's trying to build a platform to deliver Internet services, noted Li.
"However, it's very important to focus on some sectors, for example, its core smartphone business," he said.
In the past two years, Xiaomi invested in 55 companies, the China Business News reported on March 29. Of these, 29 are at the incubator stage, while 20 have launched products. Annual sales of seven of these companies have exceeded 100 million yuan ($15.45 million), according to the report.
Xiaomi shipped more than 70 million handsets in 2015 in the domestic market, which was below its forecast, finance website caixin.com reported in January.
