Dixon Technologies India, a primary supplier for Xiaomi, is reportedly engaged in discussions to construct an enormous new factory on the periphery of New Delhi, according to local news. This significant move comes amidst mounting pressure from the Indian government on foreign tech corporations to opt for domestic assembly affiliates.

The proposed new manufacturing entity is expected to span over a substantial area of more than 300,000 square feet, lining up to be one of the largest of its kind. The primary focus of this production hub is anticipated to be the assembly and production of Xiaomi smartphones.

The prospect of this major manufacturing plant is the talk of the town as it is poised to be unveiled by the end of the month. The official confirmation or comment from the company's end remains pending leaving room for further speculation and anticipation.

Increased pressure from the Indian government on Chinese tech firms has implied the mandate for a broader spectrum of tasks to be performed locally, starting from production to the distribution of devices. Consequently, Dixon has been assembling Xiaomi's smartphone components in-house to comply with this localized mandate.

This development may bring forth consequences for Xiaomi's prior association with Indian suppliers – Taiwanese based Foxconn Technology Group’s Bharat FIH and China's DBG Technology. This may potentially disrupt Xiaomi's business model and existing supply chain in India.

Earlier this year, Xiaomi undertook a similar endeavor when it inked a deal with India's Optiemus Electronics for the domestic production of Bluetooth neckband earphones. This product was previously imported directly from China, indicating a marked shift in their operational approach.

For a stretch of time, Xiaomi held a dominant position in India's smartphone market. However, this standing began to dwindle following increasing regulatory scrutiny. An overextension in product offerings further contributed to its declining market grip, creating confusion amongst consumers and affecting its overall market presence.