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India's fraud office seeks a Xiaomi probe as the market it once led shrinks around it

Jingyue Hsiao
, DIGITIMES, Taipei

Sep 10, 2026, 12:28

0

Credit: AFP

A recommended corporate-fraud investigation would reach Xiaomi at the weakest point its India business has known. India's Serious Fraud Investigation Office (SFIO) has proposed a detailed probe into alleged irregularities in the company's business model and its compliance with foreign investment law, according to a government memorandum drafted in May and reported by Reuters on September 9.

The proposal is still awaiting clearance from the Ministry of Corporate Affairs, and no investigation has been opened; a recommendation is not a finding of wrongdoing, as The Next Web noted in its account of the document. But it lands on a company whose Indian volumes, pricing power, and legal room have all narrowed at once.
What the memorandum asks for
The SFIO memorandum sets out a 21-point framework covering the movement of funds through Xiaomi's Indian operations and whether the company obtained the prior government approvals that India has required of Chinese investors since 2020. Its stated priority is "examination of the beneficial ownership of foreign investors and group entities," per Reuters. Xiaomi told Reuters it had received no notice or communication from the SFIO and "accord[s] paramount importance to the laws of the land." The Ministry of Corporate Affairs and the SFIO did not respond to queries.
A market in its worst stretch since 2020
The commercial backdrop has deteriorated sharply. India's smartphone shipments fell 10% year-on-year in the June quarter, the biggest decline for a second quarter in six years, Counterpoint Research's India tracker found, after a 3% drop in the March quarter, itself the weakest first quarter in six years, as ETTelecom reported. Record memory prices are the trigger. Counterpoint counted more than 80 models with an average 15% price rise in the March quarter, with memory costs projected to climb 80% to 85% sequentially, and average selling prices rising roughly 15% by the end of the June quarter.
The damage is concentrated at the bottom of the market. Shipments below INR15,000 (US$158.17) fell 45% year-on-year in the June quarter, and the combined share of Chinese brands sank to its lowest level for a second quarter since 2020, according to Counterpoint. Only the segment above INR45,000 held up, helped by financing that lowers upfront cost.
"India's smartphone market remained under pressure during the quarter, as both demand and supply were adversely affected," said Prachir Singh, senior analyst at Counterpoint Research, who attributed the share losses to brands most exposed to entry-level and mid-range devices.
Xiaomi sits where the pain is
That is precisely Xiaomi's position. The company ranked fourth in India in the June quarter with a 13% share, behind Vivo at 18% and Samsung and Oppo at 14% each. It recorded a year-on-year decline that Counterpoint tied to repeated price increases on the Redmi A7, POCO C71, and POCO C75. Reuters compared the same 13% share with the 19% Xiaomi once held and reported its India revenue for 2025 at US$2.52 billion, down 40% from three years earlier.
The squeeze is structural rather than seasonal. More than half of Xiaomi's global shipments fall below the US$200 price point, exactly where memory inflation bites hardest, Omdia's first-quarter analysis found. Entry-level and mid-range phones "have become structurally difficult to sustain at previous price levels," Counterpoint senior analyst Shilpi Jain told Business Standard . Counterpoint expects Xiaomi's global shipments to fall 28% in 2026, against a projected 4% decline for Samsung and a broadly flat year for Apple.
A widening legal front
The SFIO proposal would join an already crowded docket. In February, the Supreme Court issued notice to the customs department on an appeal by Xiaomi and former contract manufacturers including Flex's Flextronics Technologies India and Foxconn's Bharat FIH, challenging a November 2025 CESTAT ruling that upheld a roughly US$72 million duty demand for excluding royalty payments from the assessable value of imported components, Mint reported. Separately, Xiaomi has been unable to overturn the INR55.51 billion (US$584 million) freeze on its Indian bank assets imposed in 2022 over alleged illegal remittances, which it denies, according to Reuters.
The memorandum also revives the e-commerce question, asking whether Xiaomi held "de facto control" over Indian sellers and launch partners while presenting those arrangements as arm's-length, and whether exclusive online launches defeated the intent of India's foreign investment rules for e-commerce. India's antitrust regulator made a related collusion allegation in 2024. Xiaomi has not commented on that matter.

Article
edited by Ysi Chen

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