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| Screenshot Xiaomi Global |
You may have heard of 'China's Apple' by now. Tech blogs and business magazines have gone crazy lately, publishing one glowing report after another on the (indeed) compelling success story of the Chinese smartphone maker Xiaomi Corp.
Yet, the label is definitely a misnomer as the company's business model is actually very different from that of the American tech titan. Regardless, the breathtaking speed with which the Beijing-based consumer electronics outfit has stormed to the top regions of the vibrant domestic phone market has left many industry analysts in awe.
According to The Wall Street Journal (paywall), the corporation sold 61.1 million phones in 2014, up from just 18.7 million in 2013.
That makes Xiaomi the third-largest vendor of mobile handsets in the world, right behind arch-rivals Samsung and Apple. In addition, the firm is currently considered the most valuable unlisted global technology start-up. Given these impressive numbers, it is no wonder that Fast Company has named the steadily rising star one of the most innovative companies in 2014 and again in 2015.
That makes Xiaomi the third-largest vendor of mobile handsets in the world, right behind arch-rivals Samsung and Apple. In addition, the firm is currently considered the most valuable unlisted global technology start-up. Given these impressive numbers, it is no wonder that Fast Company has named the steadily rising star one of the most innovative companies in 2014 and again in 2015.
This is all the more intriguing as Xiaomi is an absolute newcomer to China's volatile phone manufacturing arena.
Founded in 2010, the company released its first model not until the year 2011. A closer look at the management team might explain one of the reasons for the unrivalled ascendancy.
All team members studied at illustrious Chinese and & or foreign universities and subsequently worked for some of the biggest technology brands, such as Microsoft, Google, Motorola, Sina or Kingsoft, covering a wide field of expertise.
And the company was able to land a widely noticed coup by recruiting former Google employee Hugo Barra, the sole foreigner in management, who serves as head of international sales.
Founded in 2010, the company released its first model not until the year 2011. A closer look at the management team might explain one of the reasons for the unrivalled ascendancy.
All team members studied at illustrious Chinese and & or foreign universities and subsequently worked for some of the biggest technology brands, such as Microsoft, Google, Motorola, Sina or Kingsoft, covering a wide field of expertise.
And the company was able to land a widely noticed coup by recruiting former Google employee Hugo Barra, the sole foreigner in management, who serves as head of international sales.
Co-founder and CEO Lei Jun himself, a graduate of Wuhan University, is a charismatic, extremely ambitious and forward-looking leader who stands as kind of a rock star in the native Chinese tech scene.
An astute entrepreneur with excellent networks in the industry, Lei has a long list of profitable ventures on his résumé. He founded famed software and gaming firm Kingsoft, later established Joyo.com, an online bookstore, before heading to UCWeb, a hugely popular mobile browser. He also seems to have a real knack for investing in promising start-ups, thus adding continuously to the larger Xiaomi family (for detailed figures and charts, see this informative piece in Tech in Asia).
An astute entrepreneur with excellent networks in the industry, Lei has a long list of profitable ventures on his résumé. He founded famed software and gaming firm Kingsoft, later established Joyo.com, an online bookstore, before heading to UCWeb, a hugely popular mobile browser. He also seems to have a real knack for investing in promising start-ups, thus adding continuously to the larger Xiaomi family (for detailed figures and charts, see this informative piece in Tech in Asia).
A billionaire listed by Forbes as one of the most wealthy people in the world, Lei Jun has constantly played with his image as the Chinese Steve Jobs.
He publicly admitted to hold the late icon in high regard as a role model, going so far as to emulate his typical style in public performances. A smart move, because it surely garnered international attention.
The Chinese entrepreneur understands only too well how the game is played. This shouldn't distract from the fact that Lei's ambitions go much further, though. His stated objective is not to copy (an accusation, most frequently made by Apple, Xiaomi had to deal with from the very start), but to create a truly global lifestyle brand.
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| © Unknown |
He publicly admitted to hold the late icon in high regard as a role model, going so far as to emulate his typical style in public performances. A smart move, because it surely garnered international attention.
The Chinese entrepreneur understands only too well how the game is played. This shouldn't distract from the fact that Lei's ambitions go much further, though. His stated objective is not to copy (an accusation, most frequently made by Apple, Xiaomi had to deal with from the very start), but to create a truly global lifestyle brand.
The so-called Mi smartphones are sold directly via the firm's web portal, thus cutting out middlemen. To further limit production costs, there are only a few models available. Besides, the firm has had no need for expensive advertising campaigns as customers are mainly attracted by word of mouth via social media.
Evidently, the adoption of a flash sales model has proved very successful; the generated hype before product launches is so massive that the stock is sold out within minutes and orders rise rapidly. To be sure, the core business strategy involves a lot more than just selling millions upon millions of slick and yet very affordable mobile phones. In fact, every phone sold is heavily subsidized.
Evidently, the adoption of a flash sales model has proved very successful; the generated hype before product launches is so massive that the stock is sold out within minutes and orders rise rapidly. To be sure, the core business strategy involves a lot more than just selling millions upon millions of slick and yet very affordable mobile phones. In fact, every phone sold is heavily subsidized.
CEO Lei Jun has said himself that the hardware is only the carrier for the content of the software platform (for a video interview with Lei by Reuters, see here). It should also be noted that Xiaomi developers have created the so-called MIUI firmware that is based on Android and highly customizable.
E-commerce is one cornerstone of China's fast-rising tech star, generating sufficient revenue to subsidize phone manufacturing. The corporation views itself first and foremost as an internet company and - if you insist on analogies - something of a Amazon / Apple / Google hybrid.
The overall product portfolio has constantly grown and now includes a variety of accessories, tablets, fitness bands, smart TVs, set-top boxes, power banks, action cams, games, apps and even smart home devices.
The overall product portfolio has constantly grown and now includes a variety of accessories, tablets, fitness bands, smart TVs, set-top boxes, power banks, action cams, games, apps and even smart home devices.
Currently, Xiaomi products are available in Taiwan, Hong Kong, Singapore, Malaysia, the Philippines and Indonesia. Moreover, the company plans to expand to other fast-growing markets, including Thailand, Russia, Turkey, Brazil and Mexico, this year. The most important market outside mainland China is, not surprisingly, neighbouring India. In its attempt to gain a foothold in the country, however, the electronics outfit experienced a temporary setback late last year when it was forced to suspend all sales due to an intellectual property infringement case filed by Ericsson (the issue has been partly resolved by now and Xiaomi has been able to resume sales).
At the recent World Mobile Congress in Barcelona, Hugo Barra has announced that Xiaomi would soon open web stores in the US and Europe. Unfortunately for overseas consumers, the eagerly awaited, slickly designed quality smartphones will be missing from the offered merchandise. The new online stores will only sell accessories, such as fitness bands, headphones or power banks. Still, this could be viewed as a prudent first step to build brand awareness without running into the trap of costly technology-patent challenges that have marred other phone manufacturers for years.
(Interestingly enough, Xiaomi smartphones actually can be bought in Europe, the US or other regions already, even if the company itself doesn't sell directly. That is the turf of a whole bunch of resellers who have detected a keen interest of worldwide customers in the nice gadgets early on. For just two examples, have a look at this or this shop site.)
To summarize, global expansion is clearly on the agenda of the inventive Chinese technology big shot, but not the top priority at present.
Until now, many Chinese companies have had a hard time in their efforts to go global and to adapt to foreign markets. It remains to be seen if China's new high-flying tech giant will be able to find a way to establish a sustainable business model and reverse the tarnished image the label 'Made in China' still holds for many consumers.
The very cautious path chosen so far might not be the worst strategy to succeed in the long run.
Until now, many Chinese companies have had a hard time in their efforts to go global and to adapt to foreign markets. It remains to be seen if China's new high-flying tech giant will be able to find a way to establish a sustainable business model and reverse the tarnished image the label 'Made in China' still holds for many consumers.
The very cautious path chosen so far might not be the worst strategy to succeed in the long run.
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