India appears poised to 'zero in' on Xiaomi once again.

Around September 10, media outlets such as Reuters reported that India's Serious Fraud Investigation Office (SFIO) has suggested further investigation into Xiaomi's Indian operations, focusing on issues like foreign investment regulations, fund movements, and the disclosure of beneficial ownership. Xiaomi responded by stating that it has not yet received a formal notification from the SFIO and underscored its unwavering adherence to local regulations.

Should this recommendation receive final approval, Xiaomi could find itself under another round of regulatory scrutiny in India.

This isn't Xiaomi's first brush with such a scenario. In 2022, Indian authorities froze approximately $584 million of Xiaomi's assets, sparking ongoing disputes over funds, royalty payments, and related matters. Reuters also noted that Xiaomi's market share in India's smartphone sector has declined to roughly 13%.

At this juncture, it would be somewhat shortsighted to reduce Xiaomi's situation to mere market fluctuations within the smartphone industry.

Xiaomi has been active in India for numerous years, establishing factories, securing suppliers, and hiring staff. For a company with long-term plans, declining sales can be mitigated by adjusting products, distribution channels, and pricing strategies. However, policy and regulatory expectations are factors beyond the company's direct influence.

This is where the true essence of Xiaomi's current predicament lies.

With a workforce of 50,000, Xiaomi's integration into India is profound.

Xiaomi's footprint in India extends well beyond merely shipping smartphones for sale.

Over recent years, Xiaomi has consistently boosted its local manufacturing and procurement ratios. Indian suppliers now contribute to components such as camera modules, battery packs, chargers, back covers, USB cables, and packaging materials. Local operations have also expanded from smartphones to encompass televisions, tablets, and wearable devices.

The company has collaborated with Indian contract manufacturer Dixon Technologies to produce smartphones and has encouraged some Chinese suppliers to invest in India.

Employment serves as another tangible metric. Xiaomi India has publicly declared that it directly employs around 50,000 individuals in India, with over 95% being women.

Today, Xiaomi can no longer be simply categorized as a foreign brand selling Chinese smartphones in India. It has become intertwined with the local manufacturing ecosystem and the daily operations of India's electronics industrial chain.

Yet, precisely at this moment, regulatory issues have resurfaced. What truly worries businesses isn't necessarily the investigation itself, but whether a company operating in India for years must constantly reassess policy boundaries.

Corporate decision-making transcends the present.

To clarify, India's regulation of foreign enterprises isn't inherently problematic.

Foreign investment policies, tax systems, fund flows, and corporate governance are all integral components of a country's regulatory apparatus. Companies operating in India must conduct their business in compliance with Indian laws.

What businesses truly seek is assurance that the rules of today will guide their investment decisions of tomorrow.

In 2020, India introduced Press Note 3, mandating government approval for investments from countries sharing a land border with India. In March 2026, India modified this framework. For certain non-controlling investments, India eliminated the prior government approval requirement for non-controlling beneficial ownership of 10% or less. Concurrently, it introduced a 60-day processing and decision-making timeline for investments in sectors such as electronic components, electronic capital goods, polysilicon, and silicon wafers.

These are clearly policy shifts, which the Indian government has positioned as part of its efforts to enhance the business environment, attract investment, and bolster global supply chain cooperation.

On August 21, Indian government data revealed that as of August 20, 29 foreign investment applications had been submitted under the revised framework, spanning IT, artificial intelligence, manufacturing, pharmaceuticals, data centers, and transportation services, with a total proposed investment of ₹489.565 billion.

These are positive indicators. However, businesses don't base their decisions solely on these.

What about ongoing projects in India? What about factories already constructed? What about joint venture projects under negotiation? Will policies shift again in three years?

When a company decides to build a factory, it considers the next five or even ten years. It cannot recalculate policy risks on an annual basis.

Therefore, policy changes themselves aren't alarming. What truly escalates operational costs is the uncertainty surrounding the magnitude of these changes.

This cost may not be explicitly reflected in financial statements, but corporate management will undoubtedly factor it in.

Beyond smartphone assembly, India aims to ascend the value chain.

This is where the connection between Xiaomi's situation and India's manufacturing ambitions becomes evident.

India is indeed vigorously promoting electronics manufacturing. The Production-Linked Incentive (PLI) scheme has emerged as a pivotal policy tool for expanding smartphone and electronics manufacturing, with the government also driving investments in electronic components, semiconductors, and related industrial chains.

The outcomes are palpable. Data released by India's Ministry of Electronics and Information Technology in April this year stated that the electronics sector's output value reached approximately ₹12 trillion in FY 2024-2025, with domestic value addition currently at 18% to 20%. During the same period, India's electronics exports reached about ₹3.3 trillion, with smartphone exports accounting for roughly ₹2 trillion.

These figures underscore that India has achieved scale in smartphone manufacturing. However, the 18%-20% domestic value addition also highlights another reality: India's electronics industrial chain remains incomplete.

While smartphones can be assembled, the real challenge lies in advancing further upstream into areas such as cameras, displays, chips, PCBs, materials, and equipment.

The Indian government is now addressing this gap. Policies introduced in 2026 for electronic component manufacturing have prioritized components, sub-modules, foundational materials, and manufacturing equipment.

The issue persists. India aspires to upgrade its manufacturing sector, necessitating more foreign investment, technology, and supply chain enterprises. Meanwhile, for investments from countries sharing a land border, such as China, India maintains a distinct approval framework from that of ordinary foreign investment.

Original equipment manufacturers (OEMs) can initiate assembly operations, but advancing further upstream ultimately requires suppliers to follow suit.

Suppliers face a different calculus. The investment cycle for a component factory is far longer than the sales cycle for smartphones. What truly concerns businesses isn't the subsidies received in a given year but whether capital, personnel, technology, and supply chains can operate as expected after the factory is built.

This is an unavoidable issue for India's electronics manufacturing in its next phase.

Despite challenges, India's market remains enticing for businesses.

I don't believe that the regulatory pressures faced by Xiaomi in India imply that the Indian market has lost its allure.

On the contrary, India's population size, young consumer base, digital economy, and manufacturing policies continue to render it a market that global consumer electronics companies cannot overlook. India also remains committed to attracting foreign investment and developing its manufacturing sector.

The question, however, is whether businesses dare to make sustained investments.

The policy signals currently emanating from the Indian government indicate a desire to enhance the foreign investment environment. However, cases like Xiaomi's remind businesses that policy adjustments and long-held investment expectations aren't synonymous.

Xiaomi has invested in India for numerous years, with factories, supply chains, and employees already in place. The SFIO's recommendation for investigation has resurfaced, though the final outcome remains uncertain, and Xiaomi has stated that it has not yet received a formal notice.

Thus, it's premature to draw conclusions at this stage. However, for companies contemplating entry into India, what they will truly observe is how the investigation progresses, how rules are interpreted, and whether similar issues will be handled more transparently in the future.

India aspires to become a global manufacturing hub, and its market size and industrial policies can attract businesses.

Whether companies choose to continue investing, however, hinges on something else: whether investment decisions made today can still rely on a set of understandable and predictable rules years later.

This is perhaps the most noteworthy aspect of Xiaomi's current situation in India.