MUMBAI (NewsRise) - Chinese smartphone maker Xiaomi plans to expand manufacturing of its handsets in India, as it aims to challenge the dominance of Samsung Electronics in the world's fastest-growing phone market.

Xiaomi, which entered India in July 2014, contracted Taiwan's Foxconn, formally known as Hon Hai Precision Industry, to assemble its phones in India in 2015. Foxconn, the world's largest contract electronics maker, manufactures mobile phones for several vendors at a plant in the southern Indian state of Andhra Pradesh.

With the first plant running in full capacity, Xiaomi is now contracting Foxconn for another exclusive production unit in the same state as demand for smartphones surges in the world's second-most populous nation amid ultra-low prices for high-speed Internet.

With the new facility, more than 95% of Xiaomi's smartphones sold in India will be locally assembled, the company said in a statement last week. "Xiaomi will now have a combined production capacity of one phone per second during operational hours."

The company, however, declined to share any details of the plant's production capacity.

Lenovo, Huawei Technologies and OnePlus are among smartphone makers that have started assembling handsets in India in partnership with contract manufacturers after the government raised taxes on some foreign-made goods to spur local manufacturing. Apple, the world's largest smartphone maker, is widely speculated to start making iPhones in the country soon through a partnership with Taiwanese component maker Wistron.

Xiaomi's expansion comes at a time when India is set to become the second-largest smartphone market in the world this year. The country's smartphone market grew 5.2% to 109 million-unit shipments last year.

In the quarter ended in December, Beijing-based Xiaomi was the second-largest smartphone maker in India behind Samsung Electronics, with a 10.7% market share, according to data from IDC. Last year, the company reported $1 billion in revenue from the country, which is its largest market after China.

The company, once one of the most valuable start-ups in the world, shifted focus to India after it last year slipped off the top five ranking in its home market, where a number of smartphone makers such as Lenovo, Oppo, Vivo and Huawei Technologies are jostling for space.

These companies together accounted for a 46% share of the India's smartphone market in the last quarter. Xiaomi felt the heat of competition in India too, where its market share briefly slipped in the first half of the year.

Lei Jun, the founder and chief executive of Xiaomi, had last year said he expects the company to be the leader in India in three to five years. Manu Jain, the India head, said Xiaomi is aiming to introduce several new products.

"The increased capacity, along with an extensive offline network and strong online presence, will help us gain more ground in the smartphone market," Jain said in an e-mailed interview.

According to Faisal Kawoosa, head of telecoms practice at consulting firm Cybermedia Research, in the 6,000 rupees ($92) to 15,000 rupees price range, Samsung sold 45 handsets, including various memory capacities of same models. In contrast, Xiaomi's product portfolio stood at 13. Phones priced up to 15,000 rupees account for about 85% of India's smartphone market.

"Xiaomi has positioned itself in one of the most important price band categories in India market," Kawoosa said. "But if it has to grow its market share, the physical distribution network has to become extremely strong."

--Dhanya Ann Thoppil