Xiaomi's Dire Situation: Declining Smartphone Sales and Fraud Investigation
Xiaomi is facing new pressure in India. After its market share continued to decline due to intense competition from Apple and Samsung, the Chinese smartphone manufacturer is now being recommended for an investigation into alleged violations regarding its business model and compliance with foreign investment regulations in India.
The recommendation comes from the Serious Fraud Investigation Office (SFIB), India’s primary agency handling suspected corporate fraud. Government documents reviewed by Reuters show that the SFIO has proposed an investigation into Xiaomi Technology India Private Limited and its related entities.
The proposal is currently awaiting approval from India’s Ministry of Corporate Affairs. This process is a standard stage before the SFIO can officially commence an investigation.
The SFIO recommends that the investigation trace fund flows and examine whether Xiaomi has obtained the investment approvals required by the Indian government. These regulations became stricter after India increased oversight of Chinese investments following border clashes between the two nations in 2020.
“The most important part of the proposed investigation must be an examination of the beneficial ownership of foreign investors and group entities,” the SFIO memorandum stated, as quoted by Reuters.
The SFIO also requested that the investigation ensure whether beneficial ownership, direct or indirect control, or changes in control have been disclosed and approved as required.
“A detailed SFIO investigation is recommended to be conducted,” the memorandum read.
A source familiar with the matter said the Indian government is currently reviewing the memorandum, which was drafted in May and subsequently reviewed by Reuters.
Xiaomi’s Response
A spokesperson for Xiaomi stated that the company has not yet received any notice or communication from the SFIO regarding the recommendation. “We place great importance on applicable laws and always comply with them fully,” the spokesperson said.
The Chinese Foreign Ministry also responded to the news. Spokesperson Guo Jiakun stated he was unaware of the situation when asked about the investigation recommendation against Xiaomi.
“We hope that the Indian side provides a fair, transparent, and non-discriminatory business environment for companies from all countries investing and operating in India,” said Guo.
The SFIO has the authority to arrest and prosecute parties proven to have committed violations. However, there is no certainty as to when the Ministry of Corporate Affairs will decide whether the investigation will proceed.
“For cases like this, there is no time limit for the ministry to make a decision. The process can take months. The Ministry may assess that evidence is insufficient to proceed or may allow the SFIB to begin an investigation. The Ministry may also request other departments to examine the matter,” said Meghav Gupta, founder of the Indian law firm Consecro Law.
Foreign investment rules tightened in 2020 require investments from Chinese companies in India to obtain prior government approval. Several companies, including Xiaomi, previously noted that these rules have caused the investment process to slow down.
India began easing some of these restrictions this year as New Delhi and Beijing seek to maintain peace in the border region. Plans for a visit by Chinese President Xi Jinping to India to attend the BRICS summit are also viewed as an effort to improve relations between the two countries.
Xiaomi’s Business Under Pressure
The SFIO investigation adds further pressure to Xiaomi, which is already facing several issues in India.
Since 2022, Xiaomi has been unable to overturn the freezing of its Indian bank accounts worth 55.51 billion rupees (approximately £515 million). The freeze was implemented by India’s financial crimes enforcement agency regarding allegations of illegal money transfers, which Xiaomi has denied.
At the same time, Xiaomi’s position in the Indian smartphone market continues to decline. According to Counterpoint Research, Xiaomi now holds fourth place with a 13% market share, down from the 19% previously held by the company.
Xiaomi’s revenue in India for 2025 was also recorded at US$2.52 billion, a 40% decrease compared to three years prior.
SFIO documents mention that the recommendation for the investigation into Xiaomi stems from several complaints and information received through India’s Ministry of Commerce.
The SFIO also requested coordination with other government agencies to identify potential interrelated violations.
In the memorandum, the SFIO outlined an investigation framework consisting of 21 points, including scope, methodology, and an action plan. The agency may also summon company executives if necessary.
The SFIO will examine financial statements and auditor reports submitted by Xiaomi to the Indian government to ensure there are no material misstatements.