We were fortunate enough to be invited to a press event in downtown Taipei yesterday where Xiaomi announced their new Xiaomi 3 Smartphone and it’s latest carrier deal with Chunghwa telecom, Taiwan’s largest Telco. It was a chance to get up to speed with one of China’s most exciting, dare I say ‘hip’ Smartphone manufacturers, weighing up its larger ambitions for Asia, and possibly beyond.
To call Xiaomi a Smartphone manufacturer is perhaps to do the company a disservice. The company designs and develops its own hardware devices as well their own distinct flavor of Google’s android OS, plus a broad swathe of mobile apps and services. The name Xiaomi (小米) literally translates as small, uncooked rice or millet. This apparently originates from the company’s core concept of focusing on the smaller aspects of technological development, or indeed the minutia involved with simply getting things right.
Founded by in 2010 by CEO Lei Jun, a Hong Kong business man who currently ranks at number 23 on China’s rich-list having amassed a personal wealth estimated to be around 3.8 billion US dollars from his time with Kingsoft, a prominent software in China. Rising to become CEO of Kingsoft in 2011, Lei Jun is one of China’s more charismatic business leaders, often citing Steve Jobs as a key and influential role model for his own business philosophy – indeed to many he is simply known as the Steve Jobs of China.
Last year Xiaomi was valued at around $10 billion and currently employs around 3000 people, the vast majority of whom are based in China. Recent figures however show that they are making progress in China, at times last year outselling Apple to reach 6% market share for Q4 of 2013. But as much as Xiaomi wants to challenge Lenovo and Huawai in its homeland, the company has a very outward looking disposition, eying its neighboring countries and Western markets with intent.
Expansion Beyond the Wall
In the last year or so they have made considerable progress in terms of market share in Taiwan. Researchers IDC claiming Xiaomi’s market share at approx 3% of the total Taiwan handset market.
Part of its recent success in penetrating the Taiwan market is undoubtedly due to sales of its affordable Smartphone, the Hongmi,( or Red rice) which is aggressively priced at around $120 (NT3999). This is incredible value for a device that packs a 4.7″ IPS 720p display offering a slick user experience on Android 4.3 with its Quad-core 1.5GHz Mediatek MT6589T SoC.
This aggressive pricing is a an important feature of Xiaomi’s approach. It retails its handsets at almost BOM cost, taking a hit on extremely thin margins in the sales channel and tapping long term revenue streams selling its own custom apps, Android themes and services. Lai himself has mentioned that rather than use the example of Apple, the company’s strategy would be more accurately compared with Amazon or perhaps game console vendors who sell hardware at cost and make profits from content and services.
We were treated to several of the Xiaomi’s custom Android themes during the press conference and in fact many of the designs look outstanding. It’s clearly an area where Xiaomi are working hard – offering everything from Lamborghini themes to adorable cartoon characters for younger users.
Mi3 Launch. Chunghwa Telecom Deal
But in terms of device design, Xiaomi are not just about the entry-level segment. The press conference we attended yesterday here in Taipei, we saw co-founder and President Lin Bin announcing the arrival of their XiaoMi 3 or Mi3 Smartphone on the Taiwan market. With a 1080p 5″ display powered by Qualcomm’s Snapdragon 800 SoC, an updated v5 version of their MIUI implementation of Android 4.3 and a 13MP camera, the Mi3 is positioned to compete alongside comparable devices from the major players in the market.
In terms of price however, the Mi3 will soon be available direct from Xiaomi to Taiwanese customers for approx $330 (NT9,999). This is very aggressive pricing in a 5″ handset market where similar spec devices can cost more than twice the price.
Check out this video with Sascha getting hands with the Mi3 at CES earlier this year. Note: The model featured in this video is running a Nvidia Tegra 4 SoC. The version launched in Taiwan is runs Qualcomm Snapdragon 800.
If you needed any proof that the local telcos are happy with the Xiaomi approach, consider that Xiaomi also announced at today’s media event that as well as FarEastTone, they have now also reached an agreement with Chunghwa Telecom, the country’s largest and part government-owned telecommunications company. This is massive news for Xiaomi, and one which promises to ensure that next year they can increase their market share considerably in Taiwan.
The latest target market for Xiaomi is Singapore, where the Redmi Smartphone has, according to reports, already sold out. Neighboring Malaysia is next on their map, with expansion expected in the next couple of months. Such is the remarkable growth of the company in terms of devices sold that Lin Bin has even been quoted as saying that he fears the supply chain of China could become a potential bottleneck in the coming year.
Let’s mull over that notion for a second – they’re selling them faster than they can make them!
A lot has been made of Xiaomi imitating Apple, both in terms of device deign and the fact that Lei Jun wears jeans and black sweaters at major press events. But while many Chinese phone makers have in the past attempted to sell virtual replica devices – not least of all the Shanzhai players who still dominate the lower tiers of China’s mobile market spectrum – it seems a wholly misplaced sentiment in the case of Xiaomi.
While Apple as a company remain aloof in terms of customer feedback and input in design decisions (think non-Flash support, non-removable batteries and other design decisions that were not always popular) Xiaomi has a very different and somewhat unique approach which engages directly with its customer base, with over-the-air updates of its MIUI OS available each Friday that include and integrate feedback and input from end users.
Simply put, in terms of the relationship with its customers, Xiaomi is about as far away from Apple as a company could be.
But if there is one thing that is concrete in my mind, it is that Xiaomi have indeed mastered the art ‘Think Different’. In terms of disruption Xiaomi is ploughing a new path, one that belongs to its own dedication to listening to customers and reacting as quickly as possible to deliver the small details to the best of its ability.