Strategy Analytics warned Xiaomi’s lead of India’s smartphone market could be jeopardised if the Chinese vendor cannot swiftly resolve investigations by authorities, which news articles indicate are becoming increasingly combative.

The research company noted in a report Xiaomi maintained its lead of the market during Q1, albeit with a share diminished from 27 per cent in Q1 2021 to 22 per cent of a total of 38 million shipments. The vendor topped the market since Q3 2017, with its share peaking in Q1 2020, Strategy Analytics stated.

Strategy Analytics noted threats to Xiaomi’s position include growing shipments from rival Chinese vendor Realme, Samsung and Apple along with scrutiny from agencies including the Enforcement Directorate (ED), a body which probes allegations of money laundering and breaches of foreign exchange laws.

India is a key smartphone market, with Strategy Analytics noting it remained the world’s second-largest behind China in Q1.

It predicted “little or no impact” to Xiaomi’s performance in the country if it “can settle its cases quickly”. But Strategy Analytics added if discussions with the government “drag on for many months” there could be knock-on effects on the vendor’s “ability to grow” and potential negative impact on “its brand or market share”.

Reports by Reuters suggest protracted discussions are increasingly likely. On 7 May, it reported Xiaomi executives claimed ED officials attempted to coerce them into providing paperwork as part of a probe commenced in February, claims the government department branded “untrue and baseless” in a statement.

At the outset of its probe, the ED explained it was investigating claims the vendor’s India unit illegally remitted INR55.5 billion ($716.4 million) to a trio of overseas entities under the guise of royalty payments, either directly or indirectly benefitting Xiaomi Group.

In its latest statement, the ED noted Xiaomi executives had not filed any complaints as they provided a series of statements at various points throughout April, noting the “allegation now made after passage of substantial time is an afterthought”.

In a previous article, Reuters noted an Indian court stayed an ED move to seize $725 million from Xiaomi’s local accounts as part of the investigation.