China’s Xiaomi on Monday launched its first smartphone to be assembled in India — Redmi 2 Prime — as it seeks to cut costs and grab a bigger slice of the world’s third largest smartphone market.

Xiaomi has tied up with electronics contract manufacturer Foxconn to set up a manufacturing unit in Andhra Pradesh’s Sri City.

The company’s move to make phones in India is a major boost to Prime Minister Narendra Modi’s flagship “Make in India” campaign.

Hugo Barra, Vice-President of Xiaomi Global, said his company was “delighted to be participating in the great technological revolution sweeping India and the ‘Make in India’ campaign.”

The Indian market, which Xiaomi entered in July last year, has fast become its second-largest market as the company’s low-priced, feature-rich phones find favour with young and cost-conscious customers.

In the April-June quarter, Xiaomi ranked seventh in terms of smartphone shipments to India — a segment that is dominated by Samsung Electronics and Micromax Informatics, according to Counterpoint Research.

In quick time AP Chief Minister N Chandrababu Naidu, who launched the Redmi 2 Prime in Visakhapatnam, complimented Xiaomi for setting up the manufacturing facility at Sri City within six months.

“It is a great step forward in the ‘Make in India’ campaign and also ‘Make in AP’ campaign,” he said. “India has always been known for software and China for hardware, but now the time has come for us to make advances in hardware sector too.”

Naidu said import substitution would be of great benefit to the country, as hardware imports were rising all the time.

Apart from tax benefits of making in India, the facility will help Xiaomi better manage inventory and reduce lead times from three to four weeks, to under two weeks, said Manu Jain, the company’s India head. “Over time, most Xiaomi phones sold in India will be made in India,” Jain said.

Availability Xiaomi declined to reveal the size of its investment in the new assembly line or planned production capacity. Redmi 2 Prime will be available for ₹6,999 on and other partner sites such as Flipkart, Amazon, and Snapdeal from Monday.

Amitabh Kant, the Secretary of the Department of Industrial Policy and Promotion, said India would emerge as a manufacturing nation with the ‘Make in India’ programme and Andhra Pradesh would play a key role in it.

He said 25 sectors have been identified for promotion in the campaign.