Eva Xiao from TechNode continued our discussion on Xiaomi, focusing on what kind of company Xiaomi truly is, and the current challenges they are facing to justify their US$45B valuation. We discussed the company’s recent failures to hit their 100 million smartphones target, their loss of smartphone market share, their failure to expand aggressively into international markets such as U.S and India, and their bet on Internet-Of-Things and consumer electronics. We conclude our conversation with where Xiaomi might be in five years time.
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Notes:
- Eva Xiao, Reporter at Technode.com
- Xiaomi has a reputation as the “Apple of China”, even though their business model in China is much more similar to that of Amazon (with its focus on software services) or Dell, etc. Exactly, how should one perceive Xiaomi as a company – are they more hardware or software? [1:10]
- Most of their profit is still from hardware (94% smartphones, 11/2014)
- Innovative business model: flash sales, customer feedback, local supply chain (Foxconn, ‘made in India’), save on advertising, relies on WOM
- livestreaming from Lei Jun to leak Mi Band 2 and Mi Max
- Their ability to sell online (cut costs)
- Business models with software as a service for Xiaomi with in-app purchases. [2:55]
- Where is the current footprint of Xiaomi across the world? They have expanded to India and Southeast Asia, and avoided US on a whole (though recently they did partnered with Microsoft on patents and software productivity services) [5:31]
- Singapore, Malaysia, Philippines, Indonesia, Thailand, India, HK, Taiwan, China, Brazil
- How is Xiaomi different from competitors, such as Huawei and Oppo? [8:15]
- Xiaomi has a strong fan base in China and other parts of the world – can you explain the demographic of Xiaomi users?
- younger users
- low-middle market
- Who are the key investors of Xiaomi? (Ref: Crunchbase) [9:15]
- Ratan Tata from Tata Group – India, Robin Chan.
- IDG Capital, Shunwei Capital, Qiming Venture Partners, Morningside Group, Qualcomm Ventures, Temasek Holdings
- Xiaomi has also made investments in startups. What are the key categories of their interest and important startups we should watch? [10:42]
- hardware incubator (Huami, Zimi, Yunmi)
- Media and content recently: Iqiyi, Hungama, Blue whale media (online business media startup)
- Can Xiaomi live up to its US$45B hype? [13:32]
- They have not done well in 2015 with expansion in India and Southeast Asia, reaching only 70-80M target for sales as compared to the 100M target, what happened?
- saturating smartphone market in China
- Huawei sold 100 million smartphones in 2015, 3rd largest smartphone maker after Apple and Samsung
- Competition in developing markets: Lenovo, Huawei, OnePlus, Meizu
- Betting too much on IoT ecosystem [15:30]
- Xiaomi’s reliance on contract manufacturing compared to Huawei [16:50]
- They have not done well in 2015 with expansion in India and Southeast Asia, reaching only 70-80M target for sales as compared to the 100M target, what happened?
- Xiaomi faced an onslaught from Huawei and other smartphone makers such as Oppo, which disrupted them from the low end. In addition, Xiaomi is unable to compete in the high-end space, compared to competitors like Samsung or even Apple with the iPhone. Where do you see them going in the smartphone space? [17:50]
- In your opinion, what are Xiaomi’s current priorities and where do you think that they will be in 5 years time? [18:53]
- Xiaomi has a reputation as the “Apple of China”, even though their business model in China is much more similar to that of Amazon (with its focus on software services) or Dell, etc. Exactly, how should one perceive Xiaomi as a company – are they more hardware or software? [1:10]