Xiaomi builds ecosystem to regain smartphone share
Beijing based Xiaomi (pvt) was once the top smartphone brand in China, using innovative marketing and low-priced but ‘almost’ fully featured designs to lure Chinese smartphone users to its brand. Known as ‘the Apple of China’ the company was touted as the hottest smartphone vendor on the mainland, but saw its star dim as newer brands copied and then improved on the Xiaomi model. While the company was the share leader in China as late as 1Q 2015, they were replaced in the top position by Huawei (pvt) by the end of that year, and have struggled to stay in the top 5 Chinese brand category since then.
In early 2016, the company began a program that focused on expanding its hardware ecosystem, investing in a number of startups that can produce devices that can be operated through a Xiaomi smartphone and are sold through the Xiaomi stores across China. These devices range from rice cookers to fitness trackers and all carry the Xiaomi brand, while priced below traditional or well-known brands with the goal of serving consumers aged 17 to 35 in 2nd and 3rd tier cities.
Since then Xiaomi has made investments in 77 hardware companies, which have generated $2.17b according to the company founder Lei Jun, with 30 already marketing products, 16 generating over 100m CNY ($14.5m US) per year, and 3 companies generating over 1b CNY ($144.7m US). The ecosystem product line has expanded to include household robots, VR/AR, air purifiers, drones, headphones, TVs, STBs, and smart automotive devices, all of which are able to be controlled by Xiaomi smartphones. The company is planning to expand its investments to over 100 companies over the next 5 years.
While Xiaomi will likely continue to struggle against Chinese smartphone competitors such as Huawei, Oppo (pvt) and Vivo (pvt), they have a chance to grow their overall business as they continue to expand their ‘smart’ offerings. Of course, much will depend on their ability to choose investments in potential products that appeal to Chinese consumers, and the recent loss of Hugo Barra, a former Google product designer and well-known spokesperson for Xiaomi to Facebook’s (FB) VR effort, will change the public face of the company, but wise choices and an ever expanding product line will help to establish the company as a leader in China’s consumer IOT market, which a number of well-known CE giants are trying to enter.
In early 2016, the company began a program that focused on expanding its hardware ecosystem, investing in a number of startups that can produce devices that can be operated through a Xiaomi smartphone and are sold through the Xiaomi stores across China. These devices range from rice cookers to fitness trackers and all carry the Xiaomi brand, while priced below traditional or well-known brands with the goal of serving consumers aged 17 to 35 in 2nd and 3rd tier cities.
Since then Xiaomi has made investments in 77 hardware companies, which have generated $2.17b according to the company founder Lei Jun, with 30 already marketing products, 16 generating over 100m CNY ($14.5m US) per year, and 3 companies generating over 1b CNY ($144.7m US). The ecosystem product line has expanded to include household robots, VR/AR, air purifiers, drones, headphones, TVs, STBs, and smart automotive devices, all of which are able to be controlled by Xiaomi smartphones. The company is planning to expand its investments to over 100 companies over the next 5 years.
While Xiaomi will likely continue to struggle against Chinese smartphone competitors such as Huawei, Oppo (pvt) and Vivo (pvt), they have a chance to grow their overall business as they continue to expand their ‘smart’ offerings. Of course, much will depend on their ability to choose investments in potential products that appeal to Chinese consumers, and the recent loss of Hugo Barra, a former Google product designer and well-known spokesperson for Xiaomi to Facebook’s (FB) VR effort, will change the public face of the company, but wise choices and an ever expanding product line will help to establish the company as a leader in China’s consumer IOT market, which a number of well-known CE giants are trying to enter.
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