Xiaomi Inc. announced on Monday, August 10, that they would be teaming up with Taiwan-based Foxconn Technology Group (officially known as Hon Hai Precision Industry Co.) to start smartphone assembly in India.

For the second quarter of 2015, Xiaomi claimed the top spot – over Huawei and Apple – with 15.9 percent of the Chinese smartphone market. However, with signs of Chinese smartphone market becoming saturated, Xiaomi has had to look at alternative markets outside of its borders. The company is already selling its low-cost smartphones in India and Brazil, but the latest announcement of manufacturing taking place in India will allow them to reduce their lead times and gain a stronger presence in this expanding market.

Currently the third largest smartphone market, India is due to overtake the U.S. and become the second largest smartphone market by 2017, according to the latest research by Strategy Analytics. Xiaomi will be looking to cut costs and capture a bigger slice of the Indian smartphone market as the Indian market expands to 174 million units sold in 2017.

Production of the Redmi2 Prime will take place at Foxconn’s plant in Andhra Pradesh in southern India. The Redmi2 Prime is an Indian-specific upgrade to Xiaomi’s budget smartphone the Redmi2 (pictured above). According to company executives, the Redmi2 Prime will retail for $109.58 (6,999 rupees).

Both companies have declined to disclose the production capacity as well the investment amount.

In addition to its partnership with Xiaomi, Foxconn announced on the weekend that it would be investing $5 billion over the next five years. The investment will be used to build an electronics manufacturing plant in Maharashtra as well as research and development facilities. Apart from the production of Xiaomi’s products, the manufacturing giant also makes Apple iPhones and Samsung Electronics Co. tablets.

Xiaomi is not the only smartphone manufacturer who is looking to capture a larger share of India’s smartphone market. According to Reuters, Apple recently launched a TV ad campaign and more than doubled the number of distributors in India to five. They are also offering financing options allowing an iPhone 6 buyer to pay in monthly instalments. Recently launched, Apple Music will cost users a fifth of the cost in India, compared to users in the U.S.

Screenshot: SiliconANGLE via mi.com