Chinese smartphone maker Xiaomi, which has grown to become the largest smartphone maker in India, is looking to invest about 15,000 crore and also set up a key component plant in the country.

Manu Jain, the global Vice President of Xiaomi, speaks to CNBC TV 18 about the company's plans in India.

Here is an edited excerpt from the interview:

Q: It is an incredible journey that Xiaomi has had, less than four years, you probably the largest smart phone maker in India today and you have come and you have made this really big announcement. This is an unprecedented move as far as electronics manufacturing in India is concerned. You have announced commissioning of three additional smart phone manufacturing plants along with Foxconn. Now you are saying we are also going to make printed circuit board (PCB) out of India, take me through unpacked some of these big announcements you have made short while ago?

A: Xiaomi has had a great success in India which has started about three and a half years ago. In a short period of three years we became the number one smart phone brand. One of the key things that really helped us was our whole approach towards Making in India. We said, three years ago when we started off, we said we want to make phones locally here, we wanted to designs phones for India and make them locally here in the country. So, we had two big manufacturing plants, both of them in Andhra Pradesh (AP). We are taking the next big leap today. The first thing that we are announcing is, we are setting up three more plants across two campuses. The one big campus is in Andhra Pradesh - Sri City and there is a new campus which is being built in Tamil Nadu in Sriperumbudur near Chennai. So, across both these campuses we will have five manufacturing plants. All of them owned and operated by our partner Foxconn.

In addition to this, we also have a manufacturing unit in Noida in partnership with Hipad Technology where we used to make power banks and even in this particular unit we will start making phones. So, we will now manufacture phones across six different plants, five with Foxconn and one with Hipad.

Also Read: Xiaomi looks to invest Rs 15,000 in India; to set up key component unit

Q: What is the demand projection that you are internally expecting? I mean this is, you are increasing your manufacturing footprint three fold through this. So what is that you are expecting? Give me a number five years down the line which has sort of pushed you into making this sort of a bold announcement?

A: If you would have asked me three years ago whether we would be the number one brand and if you look at that additional numbers for last few quarters we are doing more than 9 million phones a quarter. We would have never expected that. It is very difficult for a company which has been here for three years to give a five year long projection.

Q: You are doing 35-36 million handsets you are producing currently, now you are saying you are going to increase it three fold, hence I am asking? I mean that is a phenomenal jump from where you are currently?

A: Just to clear, a lot of this has already been done and the number that International Data Corporation (IDC) is basically suggesting which 9 million in a quarter is after a lot of this addition has already happened. We are going to do this even further, we are opened to further expanding this. We are pretty bullish on Indian market.

We really believe our journey has just started. What we can achieve is a lot more. Even if you look at, this even after 9 million a quarter number that IDC came a lot of people have still not been able to buy our products. Because the demand is significantly higher.

Even after becoming the number one brand in India, a lot of people complain that they are unable to buy our products. We want to solve that problem once and for all by just increasing our supply. That is why we are taking such a big step.

Q: Because everybody would say what you are telling me is that the volumes you had anticipated earlier, eventually it surpassed and it has gone much beyond what you were expecting but that was on a lower base. But now your base in expanding and therefore I am still trying to understand? So internally what is the number that you would have given to your team to perhaps convincing the Xiaomi board to make this kind of an investment in India?

A: I really cannot talk about a number. It is very difficult for me to say. The way that we work is, we work on a very real time bases. We will continue to monitor how are demand is? How much we can supply in the local market and then we are open to expanding even setting up more plants even within the same campuses or even opening up new campuses in coming few years.

This is just a starting point for us because on one hand we want to set up more manufacturing units for our existing products which is smart phones. Secondly, we would also want to set up or get more and more component suppliers to ensure that entire supply chain is here local in the country.

Q: Already you were earlier manufacturing one smart phone a second now that has gone up to what two smart phones a second when your plants were of course operational after this what does it mean now?

A: Today, just to share some numbers, we have more than 10,000 people working across these two campuses. What gives me the most amount of pride is that more than 95 percent of these people are women. All the assembly work for smart phones is done only by women. Men are mainly used for managing warehouses and transportation.

This is really incredible because these close to 10,000 women come from 100 of villages from nearby area. Their socio-economic standards have completely changed. Their confidence has completely changed after they started working in our manufacturing plants. We are pretty excited about this.

From a manufacturing capacity perspective of course now it used to be one phone a second till about last year. Over last one year because we have set-up so many new manufacturing plants it has gone to two phone a second during operational hours.

We are pretty excited about this two phone a second number. I wouldn't want to comment on where would it be in future. But pretty excited about this number.

Q: It has not happened before - 50 suppliers you brought under the same roof to try and many of them would be looking at investing in India. Roughly if everything goes well, what is the kind of investment that we could be expecting?

A: These are the 50 biggest global suppliers that Xiaomi has and we are trying to convince all of them to come to India and setup a local manufacturing unit. They are here for three days, they are meeting central government, they are meeting different state governments, they are meeting different industry bodies and trying to understand how does it look like to setup a local manufacturing unit here in the country. Our aim is to educate them because many of them have never been to India, so they might have some concerns, some apprehensions, so to mainly educate them and get them excited to setup a local plant here. We believe if all 50 of them decide to invest the rough math is approximately Rs 15000 crore worth of investment might happen over next few years and can generate as high as probably 50000 jobs in the country.

Q: This could well be the highest FDI inflow in the electronic manufacturing space that we have seen in the recent past?

A: Yes, one single or the single biggest investment in the electronics manufacturing. This will not just benefit Xiaomi but this will benefit the entire eco-system because a lot of these component manufacturers even though they will start manufacturing for Xiaomi but tomorrow they will also supply to many other smartphone makers. The entire smartphone industry, electronics manufacturing industry will benefit from this. What I really hope is, with this particular thing India can transform into a big global manufacturing hub. I truly believe India has the potential to achieve this but for whatever reason we have not been able to do it in last few decades but we really hope we can take India to a very different level.

Q: When you were speaking with some of the suppliers privately, have some of them already evinced interest? The fact that they are here would show that they are certainly interested but what are you sensing when you are speaking with them, are there certain regulatory concerns also that you fear could perhaps derail the sort of investment plans that you have outlined for me?

A: No significant regulatory concern. Most of them still do not understand India. If you look three years ago, when we started manufacturing in India, the biggest debate was that a lot of these component manufacturers didn't want to come to India because there were no phone manufacturers. A lot of phone manufacturers did not want to come to India because they were no component suppliers. With companies like us setting up local manufacturing units, that deadlock has been broken. These guys already have well established customers in India, who are making phones in India. So, there is an incentive for them to come and setup a local manufacturing unit.

Most of them are excited. They are pretty intrigued by what has happened in India, how the smartphone industry has completely taken off. They are pretty excited to come here and at least explore. It is just a matter of education on how India is the right place to be in and if they are educated enough they would come and setup a local manufacturing unit.

Q: The third big announcement that you have made today is the possibility of manufacturing the printed circuit board (PCB) assembly here out of India, something that I think only one company is currently doing here. What would this mean because you were telling me offline that about 50 percent of the current value of a smartphone is still imported, so, that would be addressed once you do the PCB assembly out of India?

A: If you look at the phone assembly, it is a pretty complex process and you need to bring in hundreds and thousands of components for you to make a phone. Three years ago, when we started making phones here in the country, less than one third of the phones were being produced locally here, I am talking mainly about smartphones. If you look at the last three years that number is exponentially grown. It has more than doubled or tripled. So, I would say, I don't have the exact number but probably like 70 percent of the smartphones being sold in India would be made locally here in the country, which is pretty phenomenal and has generated a lot of jobs. However what has been missing is the entire eco-system being here. The local value addition has still been very limited if you look at the phone manufacturing in India. So, we are taking the single biggest step in the local phone manufacturing, we are taking the most valuable part of the phone which is called as PCB which is where the CPU, GPU, all the key components, the chipsets are mounted on this particular board and we are starting to manufacture that particular product here in the country. That approximately attributes about 50 percent the value of the phone and that we are assembling or manufacturing locally here in the country. This is a fully automated process, there is a new state of the art plant that we have setup along with Foxconn in New Chennai and our hope is that we want to significantly ramp it up over next few months.

Q: Currently 95 percent of the phones that Xiaomi sells in India is locally assembled here and now with the PCB also being made in India, do we see practically all your phones then that you are selling in India, the PCBs would also be made in India?

A: That is what our aim is. More than 95 percent of phones that we sell in India are made locally here Still 5 percent are imported, the reason is whenever we have a big sale event or there are few phones which are very complicated to manufacture or assemble here in the country, those are the ones that we import from China. However that number is very small. Amongst all the phones that we are making locally here our aim is by the next quarter which is early Q3, we want to ensure 100 percent of the PCBs for the locally manufactured phones should be locally assembled or manufactured. So, all our India manufactured phones will have locally manufactured PCBs in next one quarter.

Q: How many PCBs are we talking about then on manufacturing at a larger level?

A: If you look at our phone manufacturing, it is 2 phones per second, so which means PCBs would also be 2 PCBs per second. If you look at from an overall volume perspective, you know the volume that we have been doing for the last few quarters, so we will try and hit that number or even higher than that for both phones and PCBs.

First Published:Apr 11, 2018 12:44 PM IST