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June, 2018

Why Xiaomi still copies Apple

Original article: Counterpoint Research

Beijing-based Xiaomi, one of the world's most valuable startups, continues to liberally borrow from iconic tech giant Apple's designs. Xiaomi's new flagship Mi 8 smartphone doesn't just look similar to the iPhone X: It's closer to a carbon copy. Smartphone reviewers widely agree that the Mi 8 is among Xiaomi's most blatant iPhone imitations.

Analysis:

Just a few months ago, it seemed Xiaomi's copycatting days were through. The company's recent success in India - where it is the top-selling smartphone brand - along with the steady growth of its ecosystem, suggested that it was developing a mature brand identity of its own. A massive Hong Kong IPO expected to raise more than $10 billion is also planned for later this year. As an ascendant Chinese tech brand, Xiaomi shouldn't need to "borrow" from Apple's industry-leading designs. 


Or so we thought: Then came the Mi 8, which so closely resembles the iPhone X that you need to eyeball the Android OS homescreen to tell them apart. Noting the Mi 8's similarity to the iPhone X, The South China Morning Post said that "old habits die" hard in a June 1 report, criticizing Xiaomi for creating "the most blatant rip-off yet" of Apple's flagship handset and the world's best-selling smartphone at present. 


Android Authority went a step further in a June 7 report, suggesting Xiaomi's new flagship smartphone is "the iPhone X clone nobody wanted." Xiaomi certainly could have tried to produce a more original product. On the other hand, "why would a company risk doing something different when it could (almost) guarantee sales following in another’s footsteps? Offering a best-selling product equivalent, at an even better price," the report opined. 


That sums up a key element of Xiaomi's ethos: Channel the world-class aesthetics of others in attractive products of decent quality, but don't invest in cutting-edge product design or technology. That controls costs, letting the company give consumers bang for their yuan. The earliest Xiaomi smartphones (launched in 2011) looked like the iPhone 4. Xiaomi's CEO Lei Jun delivered product launches in a black turtleneck and jeans, channelling Apple's iconic founder, Steve Jobs. Xiaomi quickly gained a reputation as an Apple copycat. For an unknown Chinese smartphone vendor, The Donald's public-relations philosophy (which he shared with the world in The Art of the Deal) rang true: "Bad publicity is sometimes better than no publicity at all. Controversy, in short, sells." 


Xiaomi also knows its target market. Loyal iPhone users might mock the Mi 8 for aping Apple's designs. But Xiaomi has never seriously aimed at the premium smartphone segment. The result has been razor-thin margins on mobile devices: below 5%, according to Counterpoint Research. Yet the company makes up for that by profiting handsomely from the sale of its services. Gross margins are 60%. Last year, Xiaomi earned a total of $1.5 billion in revenue from the sale of services built on top of the Android OS, mostly to users in China. It's an effective business model in China, which lacks the Google Play store, Counterpoint notes. 


As long as Xiaomi's ecosystem is growing healthily, and its product design can stop short of actual infringement, why not continue to project the image of "an affordable Apple alternative?" 


Provided that the Mi 8 sells well, we're likely to see more of the same from Xiaomi, Android Authority says. "When you’re part of a stagnating industry with nothing new to offer, your second best option is to offer what’s popular." 

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