The Indiranagar 100-Feet Road is the commercial heart of India’s technology capital Bengaluru, lined with international brand stores, bars, restaurants, and food courts. Owning retail space here, alongside consumer giant Reliance Digital and German footwear brand Puma, is a marker of success for brands breaking into mainstream consciousness. Chinese smartphone maker Xiaomi’s two-story, 6,000-square-foot flagship store is right at the heart of the district. Behind its saffron frontage is a showcase for its as-yet-unlaunched handsets, televisions, laptops, fitness bands, e-scooters, and water purifiers. 

In June, the store had a complete facelift. A new logo was put on the front of the building that read: “Made In India.” By August, the interior had been decorated with tricolored balloons in the green, white, and orange of the Indian flag. Along the walls, a company timeline showed the history of Xiaomi’s manufacturing operations in India. Mentions of the company’s heritage — it was founded in Beijing in 2010 — disappeared. Hundreds of the company’s stores across the country underwent the same transformation. “Super proud to share that majority of our TVs are #MadeInIndia! We employ thousands of team members across our India factories #ProudIndian,” tweeted Manu Kumar Jain, the India head of Xiaomi. 

Anti-China sentiment had already been rising in India’s heartlands before a skirmish in June in a disputed Himalayan border region left 20 Indian soldiers dead. Nationalists started smashing Chinese-made televisions; one minister called for shutting down Chinese restaurants. A few weeks after the skirmish, the Indian government banned TikTok, along with hundreds of Chinese apps, and, in August, passed an unofficial order to phase out dependence on Chinese telecom equipment, including 5G networks. Prime Minister Narendra Modi made a special appearance on television encouraging Indians to be “vocal” in their support for “local” products, creating the #vocalforlocal slogan. 

Chinese smartphone makers like Oppo, Vivo, and Xiaomi — who made up 81% of the Indian market — were left in a precarious position after the clash. Right-wing groups gathered outside Oppo’s factory in the outskirts of Delhi and burnt effigies of Xi Jinping, as they demanded that the plant be closed. Some companies battened down the hatches, suspending their prime-time advertising campaigns. Vivo pulled out as the title sponsor of the country’s biggest sporting event, the Indian Premier League cricket competition, after an aggressive campaign against it on social media. Stray protests took place outside some Xiaomi stores, as threats of vandalism loomed large and mobile shipments from China were stalled for manual inspection at Indian ports.

But while other Chinese brands retreated from the limelight, Xiaomi pursued a unique — and potentially high-risk — strategy: It presented itself as not being Chinese after all, but Indian. Jain, its figurehead in India, took to television, newspapers, and social media to talk up the company’s all-Indian local leadership team and the thousands of jobs it had created in manufacturing and retail. “We are more Indian than anyone else,” Jain told CNBC-TV18. The company even donated money to the families of soldiers “martyred” in Kashmir.

Jain has proven adept in using social media and his own personal brand to launder Xiaomi’s origins. But the company faces growing pressure in an unstable political environment. Narendra Modi’s government is once again proclaiming its desire to bring manufacturing back to India, offering lavish incentives for export-led manufacturers, which may help once-moribund local phone brands. Xiaomi has indeed moved some of its production onshore, but the core components of its devices are still made in China. With the country’s nationalist surge unlikely to end soon, Jain and Xiaomi will eventually have to face up to the question: How Indian is Indian enough?

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Jain, 39, “is the Indian middle-class dream personified,” in the words of a former colleague. As a child, he lived in Meerut in northern India, alongside 150 members of his extended family, in an isolated housing compound inside a military quarters built by his great grandfather. “I had never even been exposed to the outside world,” Jain says.

After studying at the prestigious Indian Institute of Technology and at the Indian Institute of Management business school, he joined the global consulting firm McKinsey.

Jain’s early career in technology was successful but low profile. He quit McKinsey in 2012 to launch e-commerce portal, which was sold to SoftBank-backed (now Walmart-owned) rival Flipkart for $70 million in 2016. By then, Jain had already moved on to start a short-lived wearables company. In 2014, he became Xiaomi India’s first hire, recruited by Hugo Barra, the former Android executive who had been tasked with expanding Xiaomi outside China.

At the time, the market was dominated by Samsung and by Indian brands, such as Micromax, Karbonn, and Lava, whose model was to import unbranded Chinese products and sell them as their own. “There was no R&D team, no product team, and no product design. They would basically just buy those products and sell them here,” says Jain.

Xiaomi’s entry was not just about cutting out the middleman. In China, Xiaomi, along with Oppo and Vivo, had evolved beyond their origins in cheap but unreliable products and were now designing and producing higher-quality but affordable devices that were well adapted to a market like India, where disposable income was increasing in step with demand for mobile data.

Jain began his tenure at Xiaomi with a big gamble. In 2014, only 6% of Indian retail sales happened through e-commerce, but Jain launched Xiaomi as an online-only brand, replicating an approach that had worked in China. 

Data: Counterpoint Research

“Most people said, You are going to fail. You are going to be a disaster,” he said during a 2017 TED Talk. “Most smartphone brands until then focused on building large distribution networks, and we didn’t do that.” 

To drum up interest, the company organized flash sales and made sure the phones sold out quickly, to enhance their perceived popularity, a technique known as “hunger marketing.” They spent relatively little on advertising, instead relying on their users to become evangelists for the brand.

Xiaomi’s phones seemed to hit a sweet spot of pricing and specifications. “Their phones were undercutting basically every other device on the market by half,” says Harish Jonalaggada, Asia editor at mobile review portal Android Central. The company launched phones for $180, with high specs like 64GB storage and 4GB RAM that were previously seen on only devices over $400.

The rush of orders for the launch of the Mi 3 model crashed the Indian e-commerce website Flipkart in the summer of 2014. 

But Xiaomi’s success wasn’t just about its hardware. Under Jain’s leadership, the company tailored its Android-based operating system, MIUI, to the local market. One feature, Smart SMS, identifies the cluttered text messages that Indian Railways sends to its customers and extracts booking information, turning it into a ticket-like document. Xiaomi was the first company in India to incorporate a popular “dual app” feature that allows users to run duplicate versions of the same app — such as WhatsApp — on the same phone.

As online channels exploded in popularity and started to become saturated, Xiaomi shifted direction. In 2017, the company dramatically expanded its physical retail presence, pushing deep into rural areas. In October 2018, it set a mark recognized by the Guinness World Records by opening 500 stores in a day. “One of the reasons Xiaomi has done well is — from both a product perspective and channel perspective — they made decisions unique to the India market,” says a Shanghai-based financial analyst covering Xiaomi who requested to remain anonymous, citing geopolitical tensions. In September, Xiaomi piloted its unique Mi Store on Wheels, a van that sells everything from trimmers to phones throughout the hinterlands of India. 

This sensitivity to the local market is in no small part due to the unusual autonomy that Jain has had in running Xiaomi in India. The Indian operations of Oppo and Vivo are both run by Chinese nationals. “Chinese companies are often very inward-looking and wouldn’t devolve the power in the same way Xiaomi has,” the analyst says.

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That unusual autonomy stems from the relationship that Jain has built with Lei Jun, Xiaomi’s founder and CEO, a self-confessed acolyte of Apple founder Steve Jobs. Jain says that, when he and Jun first met, “both of us were wearing black T-shirts and denim jeans. It was cool.”

One former employee, who worked closely with Jain while setting up the India operations, told Rest of World: “Over a period of time when Xiaomi India was growing, Manu was able to earn Jun’s trust, which is actually very hard. … Manu’s bets on the Indian market proved him right. And so, after a while, the CEO decided to just let Manu make his own decisions, which is very rare.” 

By 2019, Xiaomi was the largest smartphone brand in India, shifting 100 million units, according to data from the International Data Corporation. The company has expanded beyond mobile and offers everything from luggage to beard trimmers. Its rise came at the cost of Indian brands, whose market share fell from close to 50% to just 13% by the end of 2018, according to market intelligence firm Counterpoint Research. 

Jun and Jain share a love of the limelight. Jun is a social media celebrity in China, posting mobile teasers and specifications to his 5 million followers on the microblogging site Sina Weibo. Jain, too, is a bona fide influencer, with 1.2 million followers on Facebook, Twitter, and Instagram. He posts daily — pictures of Xiaomi products; selfies with Bollywood celebrities, entrepreneurs, and politicians; holiday snaps; and inspirational quotes. On September 17, he posted a selfie with Prime Minister Narendra Modi, wishing him a happy birthday and thanking him for being “an inspiration” for Xiaomi’s Make in India plans. In many of the pictures, he wears blue jeans and a black “I<3 Mi” T-shirt — he owns 30 of them.

While its competitors have sponsored cricket matches and made Bollywood actors central to advertising campaigns, Xiaomi stuck with Jain as the face of the company. During India’s Covid-19 lockdown in May, he shared examples of the company’s social outreach, such as donating Xiaomi smartphones to a farmer who sold his cow to afford a smartphone for his child’s online education, or giving a Xiaomi handset to a woman who stood up to thieves trying to steal her phone, and more.

“Manu is an example of a personal brand being a brand brochure,” says personal branding expert Karthik Srinivasan, who has studied Jain’s social presence. “Even when he is sharing a casual photograph of him[self] or his colleagues working, there is always a Xiaomi product in the corner. When he shares an image of him on holiday in Goa with his wife, kids, and dog, it still says ‘Shot with a Xiaomi phone’.”

Jain’s public profile has unquestionably helped Xiaomi to present itself as more Indian than its Chinese competitors, and to humanize the company at a fraught political moment. His success has prompted competitor brands like Realme to appoint their own Indian figurehead, mimicking Xiaomi’s playbook. But that image might not be enough to convince critics that Xiaomi is serious about becoming an Indian company.

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Xiaomi’s efforts to manufacture some of its products in India began during a warmer spell in India-China relations. Prime Minister Modi, who swept to power in a landslide election victory in 2014, had promised to bring manufacturing back to the country under his Make in India initiative. A campaign, designed by advertising agency Wieden Kennedy — known for its work for Nike — encouraged international companies to manufacture in India, while Modi toured the world, bear-hugging world leaders and sharing stages with Silicon Valley entrepreneurs

At the India-China Business Forum in Shanghai in 2015, Modi met with more than 20 top Chinese executives, including Xiaomi’s president Lin Bin and then-chairman of Alibaba, Jack Ma. “We have a lot in common, and we can do a lot together,” he said, as he promised to ensure that Chinese companies coming to India would find the rules to be responsive and transparent. The program offered attractive incentives like a capital subsidy of 25% for a decade, tax deductions, and rebates on land costs, to boost electronics manufacturing. At the same time, the government increased tariffs on finished electronic goods.

Buoyed by Modi’s promise, investments rolled in. After the summit, Foxconn, the world’s largest contract manufacturer of electronics, signed a $5 billion deal to set up factories in western India. Three months later, Xiaomi announced it was partnering with Foxconn to set up its first manufacturing unit in Sri City, in the South Indian state of Andhra Pradesh. They started with a single facility assembling smartphones — the Redmi 2 Prime budget phone made there was the first Xiaomi product that came with a Make in India label on the box.

Data: Counterpoint Research

At the time, Xiaomi international executive Barra said that the move was motivated partly by a desire to minimize delivery times and reduce the need to hold large inventories. “By manufacturing in India, we’re shortening the time between a phone being produced and being delivered,” he told a local media outlet. 

Today, Xiaomi has partnerships with seven manufacturing facilities and has exclusive factories for assembling televisions and power banks. It invited 50 of its Chinese component manufacturers to set up in India and claims to source 65% of its components locally.

However, industry analysts and Xiaomi employees with whom Rest of World spoke say the extent of localization could be exaggerated, as India lacks the ecosystem to manufacture high-value components. “Currently, only cables and chargers are being made in India,” says a Xiaomi India executive who spoke to Rest of World on the condition of anonymity, adding that Xiaomi is now trying to localize production of the phone’s camera module.

So far, India has been able to create domestic manufacturing capacity only in low-value components, like packaging and printing. High-value components, like printed circuit boards (PCB) — the core of the phone, which accounts for almost 40% of its total cost — continue to be imported, mostly from China. Xiaomi’s pitch that it sources two-thirds of components locally doesn’t square with the reality of electronics manufacturing in India. 

“It’s wishful thinking for Xiaomi to source 65% of components for phones locally, since we don’t have active component makers in India. The country is not yet a manufacturing powerhouse,” says Jayanth Kolla, a telecoms analyst at research firm Convergence Catalyst.

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While the relationship between Beijing and New Delhi has well and truly soured, Jain says Xiaomi is still investing in manufacturing in India. Although he declined to comment on the geopolitical spat, he was quick to point out that his company’s localization drive predates it. “Five years ago, there was no so-called nationalistic feeling, but still we wanted to build phones in India,” he says, adding that Xiaomi is now doubling down on Make in India. “We started with one manufacturing plant, now we have multiple. We started manufacturing TVs. We got 50 global suppliers to come here.” 

Jain is keen to distance himself from any discussions of the nationalist forces buffeting the tech sector. The decision to quickly erect “Made in India” hoardings in retail stores in June was, he says, not prompted by any orders from headquarters. “I don’t think that was a conscious decision, or that was any central decision,” he says. Instead, these were judgments made by “empowered” local teams, he explains.

Xiaomi’s rivals are trying to profit from anti-China sentiment. This October, in a video uploaded to YouTube, the founder of Indian technology brand Micromax, Rahul Sharma, announced that his company, which got out of the smartphone business after dwindling in the shadow of its Chinese rivals, was getting back into it. “What happened at the border was wrong,” Sharma said. “You, the people, called out to Micromax again.” Micromax’s current share of the mobile market is 1%. 

When a nationalist sales pitch pairs up with a competent product, the results could be damaging for Chinese brands. “It definitely opens an opportunity for Micromax and other Indian brands,” says Navkendar Singh, smartphone analyst at the International Data Corporation. 

The total market share of Chinese smartphones dropped to 75% in September, from 81% in January. For the quarter ending September 2020, Oppo and Vivo sales declined, but Xiaomi’s grew by 4%.

Analysts said that, while the current tensions may dent Xiaomi’s sales growth in the short term, its popularity may endure. “They have 81% of the market because the Indian consumer effectively chose them for 81% of situations,” says Amit Joshi, professor of marketing at IMD business school. According to Joshi, the country of origin will not have a huge impact on the purchase decisions for most products.

For his part, Jain is sticking to the line that Xiaomi is Indian. “For me, Indianness is in spirit,” he says. “Our phones are customized for India. Many of our products are designed in India for India, and all phones are made in India by Indians … [so] it is an Indian company.”