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Xiaomi India, the Chinese smartphone brand, is undergoing a major organisational restructuring as it deals with dwindling market share, more scrutiny from government authorities, and the need to streamline operations. According to corporate insiders, Xiaomi India intends to reduce its headcount to less than 1,000 employees, a significant reduction from the 1,400-1,500 employees it had at the start of 2023. Recent layoffs have occurred, and more are predicted in the coming months.
Xiaomi India’s reorganisation initiatives have resulted in a shift of decision-making authority to the Chinese parent firm, reducing the autonomy of the local executive team. Employees report that from the beginning of the year, the corporation has been systematically reducing its employees. Xiaomi India, on the other hand, claims that staffing decisions are mostly influenced by business prospects and that local Indian leadership continues to be empowered. The corporation insists that it will continue to hire as needed.
According to sources, the leadership team was pushed earlier this year to assign specific members of their teams to a performance improvement plan (PIP). This action permitted the future firing of employees on the basis of poor performance. These layoffs correspond with internal structural changes within the corporation as the Chinese parent company takes on more decision-making authority. Employees believe that the change in decision-making authority contributed to Xiaomi’s falling market share.
Xiaomi India’s declining market share can be linked to lackluster demand in the sub-Rs 10,000 sectors, which the company formerly controlled. Shipments in this division fell by 44%, the greatest loss in the brand’s history.
Xiaomi India’s shipments decreased to 5 million in the first quarter of 2023, down from 7-8 million the previous year, dropping the company to third place in the Indian smartphone market, behind Samsung and Vivo. According to Counterpoint Research, Xiaomi India will have a difficult year, with shipments declining significantly year on year.
Apart from market issues, Xiaomi India has encountered a liquidity bottleneck as a result of the Enforcement Directorate (ED) taking nearly Rs 5,500 crore of its bank assets on suspicion of unlawful money remittances abroad. Xiaomi is fighting these charges and seizures in court. Despite these losses, the company recorded a 9% increase in revenue to Rs 39,099 crore in the fiscal year 2021-22.
Xiaomi India’s, which entered the Indian market in 2014 and soon grew to become the top-ranked smartphone brand, has faced increased scrutiny from the Indian government, mirroring a trend seen with other Chinese firms.
Due to several concerns, including data security, national security, and trade imbalances, the Indian government has taken steps to scrutinise and control the operations of Chinese enterprises. These worries have grown in recent years, prompting increasing scrutiny and harsher laws for Chinese enterprises operating in India.
Data security is one of the major concerns expressed by the Indian government. There have been allegations that Chinese corporations, notably Xiaomi, have been collecting and storing user data without their knowledge or in contravention of Indian data protection rules. Such worries have driven the government to enact stronger rules and audit Chinese enterprises’ operations to verify compliance with data privacy and security standards.
Geopolitical tensions between India and China have also contributed to the increasing scrutiny. Border issues between the two countries, as well as geopolitical tensions, have created scepticism against Chinese firms in India. As a result, the Indian government has become more careful in monitoring the actions of Chinese firms, including Xiaomi, in order to protect national interests.
These considerations have contributed to Xiaomi and other Chinese corporations facing more scrutiny in India. Increased regulatory requirements, audits, and investigations into their operations are among the actions taken by the government. This scrutiny has changed Xiaomi’s business environment, as well as its decision-making processes and organisational reorganisation in reaction to the changing regulatory landscape.
It is important to highlight that the inspection and regulatory procedures do not apply only to Xiaomi, but also to other Chinese companies operating in India in many areas. The Indian government’s goal is to enforce compliance, defend national interests, and keep the country’s commercial climate secure.
Following the departure of former India head Manu Kumar Jain in June 2021, Alvin Tse, the former Xiaomi Indonesia leader, was appointed general manager. Muralikrishnan B was then promoted to the post of president of India operations. According to sources, important team leaders now report directly to Tse, who participates in decision-making via the business management committee (BMC) following consultations with headquarters. The corporation downplays the transfer of decision-making power, instead emphasising the collaborative decision-making process including Indian and global leaders.
The recent layoffs and internal restructuring are taking place in the context of the ongoing ED case. Xiaomi’s lawyers have cited a financial need and asked for an interim ruling allowing the company to utilise its bank accounts for day-to-day expenses while the legal struggle is ongoing.
Last but not least, In the face of diminishing market share, heightened government scrutiny, and financial constraints, Xiaomi India is taking aggressive initiatives to solve market difficulties and streamline its operations. The company’s efforts to adapt to the changing situation are reflected in the reduction in headcount and restructuring initiatives. Despite these obstacles, Xiaomi India is committed to its activities in the nation and intends to successfully traverse the market.