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The Kingdom of Xiaomi

Feb 21, 2018 by Chauncey Jung
The Kingdom of Xiaomi

Xiaomi is aiming to be the Chinese Smartphone hegemony in spite of the harsh competition.

Xiaomi is now aiming to become the top smartphone company in China. During a speech on Xiaomi’s 2017 year-end Gala in February 2018, the company’s founding CEO Lei Jun revealed the company’s ambition to win back the Chinese smartphone market in two and a half years.

The once leading smartphone manufacturer suffered from mediocre performances in 2015 and 2016. This has allowed Huawei and Oppo, two of Xiaomi’s main competitors, to become sizable obstacles in Xiaomi’s goal to establish hegemony in the Chinese market.

2017 was an extraordinary year of comeback for Xiaomi, achieving a 96.9% growth in its Y-o-Y shipment volumes. Having garnered 7% of the global smartphone market, Xiaomi now wants to exceed its main competitors, Huawei and OPPO, to become the dominant smartphone brand in China.

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Smartphones and laptops that are similar to iPhones and MacBook at merely half the price. This has allowed Xiaomi to gain a significant market share.

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Xiaomi’s phone in a glance: Prices Ranging from ¥1299 to ¥3299, much more competitive than its main competitors

What has also helped is its heavy emphasis on low-end markets and the small-budget customers. Xiaomi’s economical products, the Redmi smartphones for instance, are selling for as low as ¥599.

While the economical products may be less sophisticated and be rated lower for their performance, they are nevertheless smartphones that can run the most popular applications such as WeChat and AliPay. So they suit the needs of low-income groups in China perfectly. In fact, the low-income consumers who constitute the bulk of the market, are the reason Xiaomi has bounced back. Neither Huawei nor OPPO can offer a product at a price comparable to the Redmi. Hence, Xiaomi can rule the roost in the lower end of the smartphone market. After all, anybody anywhere in the world would rejoice at the prospect of owning a smartphone under $100.

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(Despite being called the Apple Inc. in China, Xiaomi’s business expands way more than smart devices. The company developed even air purifiers to combat serious pollution issues in China)

The strongest advantage for Xiaomi, however, is its diversified products in many other fields. Having a vision of facilitating the life of ordinary families with technologies, Xiaomi’s Smartphone products could leverage the company’s products in other fields. Air purifiers, TV boxes, and even rice cookers offered by Xiaomi can connect with Xiaomi Smartphones, making the smartphone a key component to a higher quality of life enjoyed by the consumer.

Glory and challenges ahead

Despite the many advantages Xiaomi has in its bid to expand its market share in 2018, it nevertheless faces huge and intense challenges.

Despite enjoying a rising popularity in China, Xiaomi still needs to enhance its brand both domestically and internationally. The impression of cost-effectiveness that helped Xiaomi generate huge profits is now hindering the company’s business growth. In comparison with global brands such as Apple and Samsung, Xiaomi is likely to be seen as inferior – certainly unsuitable for high-end consumers. Those with deep pockets may pick Apple, Samsung, or Huawei products simply because of better brand alignment. Perhaps for some customers, even BlackBerry is more recognized than Xiaomi. And this has nothing to do with the actual quality of Xiaomi’s products.

Xiaomi’s biggest challenge comes from not having a flagship product. The company is yet to develop any products that can match the reputation of iPhone X or Samsung Galaxy Note 8. Similarly, it doesn’t have products that are as recognized as the Huawei Mate 10, OPPO R11 or any other equivalent model by a domestic competitor. Xiaomi’s Mix 2 doesn’t make the cut. So, in essence, a great company still awaits a flagship product that can be the envy of competitors and the pride of the consumer.

Although smartphones and mobile applications may seem to be trending items in China, the market life cycle is also rapidly reaching the saturation phase. For the past years, Xiaomi, together with many other Chinese tech firms, benefited from the increasing smartphone demands in Chinese sub-urban areas. Smartphones were elite lifestyle products in China four years ago, but now they are in everyone’s hand. However, the ubiquity of smartphones means that smaller brands are crushed to a pulp in the market. And for those who are still alive in the competition, not only will their margin of profits decline, their margin of error will also get smaller.

It all Comes Down to that Key Product

Sifting through Xiaomi’s prospects and challenges in 2018, it’s clear that the company can make its own fate. In addition to dominating the low-end market,, the rising tech firm needs to make effective strategies to improve brand awareness and flagship product developments.

Samsung successfully transitioned out of being seen as an inferior brand in the past decade. And with Xiaomi making a clear product differentiation between its Mi phone and the RedMi phone, the company is certainly aiming to become a better-recognized brand.

To become that, Xiaomi must reshape itself as an innovator, an original thinker and not a provider of alternatives. Next stop: a true flagship product from the Xiaomi stables.

Chauncey Jung

Chauncey Jung works with a unicorn Internet firm based out of Beijing. In his earlier stint with Sohu, a lead online-news platform headquartered in Beijing, Chanucey wrote in English on various subjects, spanning from culture, politics to social changes. His professional experience pays him off an insider perspective over China's internet industry. Completed his bachelor and master education in Canada, Chauncey is obsessed with trending technologies and economic developments across Asia. He can be reached at chaunceyzhang@foxmail.com

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