Xiaomi Inc. supplier Dixon Technologies India Ltd is set to open a massive new factory on the outskirts of New Delhi, as Chinese tech firms are urged to use local assembly partners.

Dixon will invest more than Rs 400 crore ($48.2 million) over three years in the factory, which is spread over more than 300,000 square feet or the size of six football fields and will largely produce Xiaomi smartphones, people familiar with the matter said, declining to be named as the matter is private. The plant is set to be inaugurated by a government official toward the end of this month.

Beijing-based Xiaomi has been compelled to partner with Dixon for smartphone assembly because India is pressing Chinese companies to localise everything from manufacturing to distribution of devices. That means Xiaomi’s older suppliers in the country — Taiwanese Foxconn Technology Group’s Bharat FIH and China’s DBG Technology Co. — are set to lose business.

Xiaomi and Dixon representatives didn’t respond to requests for comment.

In a similar move earlier this year, Xiaomi handed a contract to local company Optiemus Electronics Ltd. to make its Bluetooth neckband earphones, a product it previously imported from China.

Xiaomi was once an unrivalled leader in the domestic smartphone market, but lost steam after facing heightened regulatory scrutiny and over-expanding its product portfolio — which by its own admission confused customers.

Also read: Govt curbs import of laptops, tablets on security concerns

India, the world’s second-biggest smartphone market, is a hotly contested region for the world’s largest phone brands, with manufacturers such as Apple Inc. competing to boost sales in the world’s most populous country. Xiaomi is betting on a gradual recovery, as it looks to offer affordable locally made 5G smartphones.

The Xiaomi partnership is another boost for the homegrown Dixon, which is among the companies vying to become India’s response to Foxconn — Apple’s Taiwanese supplier most famous as the key maker of iPhones. Founder Sunil Vachani, a suave dresser who often sports smart jackets or formal suits, started Dixon with borrowed money in a rented shed outside of New Delhi three decades ago. Today, Dixon is a rapidly expanding electronics company that makes products including smartphones, washing machines and television sets for brands such as Motorola and Samsung.

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