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Take note, Huawei: Xiaomi in no mood to pull punches as its stock falls

Jan 16, 2019 by Yun Nie
Take note, Huawei: Xiaomi in no mood to pull punches as its stock falls

China’s Xiaomi (小米), one of the fastest-growing smartphone brands in the world, saw its shares plummet last week. The Chinese smartphone maker’s stock had dropped 3.6% when the market closed on January 9, taking its three-day tumble to 17%, losing USD 6.2 billion in market value, reported Bloomberg.

The plunge is partly sparked by the half-year lockup period that followed Xiaomi’s Hong Kong debut, during which a large number of investors were prohibited from selling their shares.

Despite the big drop-off, Xiaomi has turned out to be a competitive brand with annual smartphone shipments exceeding 100 million last year. Right in the beginning of 2019, Xiaomi has begun to boost sales and popularity through a series of financial gestures intended as a threat to longtime rival Huawei (华为).

Redmi’s freedom and Note 7

Xiaomi launched the flagship Redmi Note 7 at a starting price of USD 150 on 10 January, featuring a 48-megapixel camera, a 6.3-inch FHD LCD waterdrop screen, Snapdragon 660 processor and a 3900-mAh battery. Redmi Note 7 posed a big challenge to Huawei what with the eye dropping features and competitive pricing.

That’s not all. Last week, Xiaomi CEO Lei Jun announced that Redmi would start operating as an independent entity.

Xiaomi launched the flagship Redmi Note 7 at a starting price of USD 150
Xiaomi launched the flagship Redmi Note 7 at a starting price of USD 150

The split is likely to significantly hurt Huawei and its sub-brand Honor (荣耀). Chinese news platform Jiemian.com (界面) commented, “Honor targets those who rely heavily on online channels to purchase affordable phones. After the separation, Redmi can concentrate on the Chinese e-commerce market and produce quality entry-level and mid-end handsets to take on Honor.”

Additionally, turning Redmi into an independent brand can also help ease Xiaomi’s burden, allowing it to compete with Huawei in the mid-end and high-end market.

Xiaomi didn’t directly respond whether it intends to dismantle the monopoly of Huawei, but Lei Jun wrote in his Weibo post that the firm “had no fear of any opponent”. The idea is Redmi would get better by providing more cost-effective mobile phones to its fans. The brand would also speed up the pace of internationalization to take on its global counterparts.

Investment in electronics venture TCL

After tasting success in the mobile phone sector, Xiaomi turned to the smart home and internet of things (IoT) businesses for a bargaining chip in competition with Huawei.

Chinese home appliance maker TCL announced in a statement that Xiaomi has acquired a total of 65.168 million shares for CNY 167 million (USD 24.4 million), which deepened an existing alliance between the duo. The tie-up would enable TCL devices to be incorporated into Xiaomi’s supply chain and provide tremendous support to Xiaomi’s IoT business.

Xiaomi has acquired a total of 65.168 million shares for CNY 167 million
Xiaomi has acquired a total of 65.168 million shares for CNY 167 million

Xiaomi’s IoT business hit the ground running even before investing in TCL, fueled by solid partnerships with smart device manufacturers. According to the company’s financial reports, revenue from IoT soared 89.9% year-on-year to CNY 10.8 billion (USD 1.6 billion) during the first three quarters of 2018.

“It is bad news for Huawei because the thriving IoT business has proved Xiaomi’s exceptional competence to boost its ecosystem by leveraging resources and integrating supply chain,” commented Jiemian.com.

Tie-up with short-video app TikTok (抖音)

Few days before launching Redmi Note 7, the Xiaomi sub-brand Redmi declared on Weibo that it was entering into a strategic partnership with TikTok, a Chinese "musical" social app that has conquered young users from every part of the globe. Both were scheduled to support the launch of Redmi Note 7’s first model.

Redmi is entering into a strategic partnership with TikTok
Redmi is entering into a strategic partnership with TikTok

Redmi did not officially reveal the rationale behind the tie-up. However, TikTok said it signaled Xiaomi’s exploration into the online content market, which could increase its monetization opportunities and further improve its odds of winning the Xiaomi-Huawei duel.

It seems that Huawei isn’t afraid of Xiaomi’s invasion. Unlike Xiaomi, Huawei boasts natural strengths in internal resources, like telecommunication, chips and tech patents. On 7 January, the tech mammoth showed off Kunpeng 920, a new processor chip for data centres and cloud computing, stepping up efforts to expand into growing markets.

Additionally, Huawei was an absolute leader by sales and YoY growth rate in the third quarter of fiscal 2018. The best-selling brand has claimed a 23% market share, with shipments in China surging 33% YoY to 52 million.

The competition between Xiaomi and Huawei is one to watch out for. Smartphones, new retail and the IoT sector are going to be the new battlefields in 2019, predicted Jiemian.com.

Yun Nie

Yun Nie is a New York-based tech reporter. She focuses on India-China financial market, global IT giants and technology-centric market trends. She can be reached at Yunnie@thepassage.cc.

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