Sign up now to get free exclusive access to reports, research and invitation only events.
Xiaomi has its sights set on international expansion and becoming a global brand
Xiaomi, which means "millet" or literally "little rice", has been the upstart tech company in China that's been making waves in the smartphone industry. Four years after its founding, the company now ranks as China's largest smartphone vendor, according to research firm Canalys. We look at what made Xiaomi a success today, and what that means for international consumers, who are starting to become the company's next target for sales.
When Xiaomi announces a product, hundreds of its own "Mi fans" are always there to cheer the company on. The smartphone maker's popularity has drawn comparisons to Apple. But some in the media have accused Xiaomi of copying too much from the U.S. tech giant. Whether it be the how Xiaomi's CEO dresses like Steve Jobs, or the way the company's products look, the similarities have popped up for years. During Xiaomi's most recent product unveiling, the company's CEO lifted from Steve Jobs, with a slide that said in English "One more thing..." before announcing its new smartband product. The fledgling smartphone maker has tried to distance itself from any comparisons to Apple, but it's obvious the company has much respect for the U.S company. In January, Xiaomi's CEO invited Apple co-founder Steve Wozniak to its Beijing offices.
Despite the comparisons to Apple, Xiaomi operates very differently than traditional smartphone vendors. In 2011, when the company announced its first flagship phone, the high-end device instantly gained a following because of its low price, at 1999 yuan ($324), when bought without carrier subsidies. Since then, Xiaomi has always sold its products at only slightly above the cost it took make them. The strategy has been a cornerstone to the company's success, and put pressure on rivals Samsung, Huawei and ZTE. Pictured is the company's newest flagship phone, the Mi 4, which uses a Qualcomm Snapdragon 801 2.5 GHz -core processor, has 3GB of RAM, and a 5-inch 1080p screen, all built in a steel casing. It has a starting price at 1999 yuan. Rather than rely on physical stores or mobile carriers, Xiaomi mainly sell its phones using e-commerce. It's a business model that has paid off, and quickly turned Xiaomi's own virtual store into a popular online retail destination in the country.
The product line that drove Xiaomi to the top of China's smartphone rankings hasn't been its flagship series, but its lower-priced Redmi phones. The phones can start at 699 yuan (US$113) when bought without carrier subsidies. Pictured is the Redmi 1S. The phone is encased in plastic, and doesn't feel premium. But it has some good specs, including a quad-core processor, a 4.7-inch screen with a 720p resolution, and a 8-megapixel rear camera. Research firm Canalys estimates that over half of Xiaomi phones sold in China are Redmi devices, and helped it grab a 14 percent share of the country's smartphone market in Q2.
If you ask Xiaomi's CEO Lei Jun why the company is succeeding, he'll point to the company's constant engagement with its "Mi fans". This is partly done through its MIUI software, a forked version of Android that's installed on company products. Xiaomi will offer updates to MIUI on a weekly basis, using input from its hardcore fans to streamline the user interface, or improve system apps. "When Apple develops its iOS 7, you have no idea what they will do with it before the release. It's not like that for us. We will first ask what you want," said Xiaomi's Lei, while speaking to the press in 2013. "I feel Xiaomi's most important secret to success is that Xiaomi is not selling a product, but an opportunity to participate."
Xiaomi hasn't been around for long, but it's leadership team features executives who've worked at top tech companies including, Microsoft, Google and Motorola. Their past projects includes developing Windows Mobile, Google Search and localizing products for the Chinese market. Before founding Xiaomi, the company's CEO Lei Jun, pictured in the center, created Joyo.com, an e-commerce site in China that Amazon later bought. Jun has said he's used his e-commerce experience to turn Xiaomi into a major force to sell phones online. Last year, Xiaomi also made a major hiring, naming former Google executive Hugo Barra to lead its international expansion. Barra has since been active in promoting the Xiaomi brand to markets in India and Southeast Asia.
Even as the company is best known for its phones, Xiaomi has been quick to expand its product offerings. Earlier this year, it began selling its first tablet, the Mi Pad, which starts at 1499 yuan ($276). The device has a 2048 by 1536 screen resolution, uses Nvidia's latest Tegra K1 processor, and has an 8-mega pixel camera in the back. There are two versions, with 16GB and 64GB in storage, but the tablet also has a microSD card slot for up to an additional 128 GB of additional memory. Xiaomi hopes it will rival Apple's iPad mini, another 7.9-inch tablet with similar specs. But the product has also drawn criticism for looking like another Apple product. In this case, media outlets have said it resembles a larger version of an iPhone 5C.
But to some degree, Xiaomi is moving faster than Apple, and has already come out with its smart TV and smartband products. Both are also priced exceptionally low. Xiaomi's second-generation smart TV has a 49-inch 4K display that goes for 3999 yuan ($649). The fitness smartband, on the other hand, will cost consumers about $13. The company also sells its own Internet routers, TV set-top boxes, external battery power backs and the Xiaomi mascot in stuffed animal form. The 5200 mAh battery pack is a top selling item on the company store, and is priced at 49 yuan (US$8).
Xiaomi doesn't have a major network of physical stores it needs to maintain, or spend millions on billboard advertising. Instead, the company largely relies on the Internet and word-of-mouth marketing to sell and promote its phones, as a way to cut down on costs. In addition, Xiaomi will only produce limited quantities of its product during the initial launch. This helps the company control inventory, and gradually ramp up production when component costs fall over time. The downside is that it can be hard to buy a Xiaomi device. The company's most recent phone, the Mi 4, sold out in 37 seconds the first day it was available on Xiaomi's online store. It's unclear how much money Xiaomi is making, but the company is still in startup mode, and focused on driving consumers to its products. Xiaomi hopes to fully monetize that user base, by selling software and virtual goods to consumers over its devices, much like Amazon does with its Kindle tablets.
Xiaomi's CEO wants the company to be an international brand the Chinese people can be proud of. Earlier this year, the company announced it plans to expand to ten foreign markets, including Indonesia, Russia and Brazil. That means the very same business model that made Xiaomi a success in China, will be put to the test on the global scene. But the company isn't using the Xiaomi name as much outside of China, and instead simply calling itself "Mi". Already, the handsets are selling like hotcakes in India, with the most recent batch of 20,000 Xiaomi phones sold out in 2.4 seconds, according to Hugo Barra's Twitter account on Tuesday.