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December, 2017

Xiaomi aims to be a global Chinese brand

Original article: Wired

Beijing-based Xiaomi has been the comeback kid among smartphone brands this year, its shipments growing so fast that it may surpass Oppo, Huawei and Apple in 2018 to become the world's No. 2 handset maker. The company's executives are mulling an IPO next year as well - to cash in on Xiaomi's resurgence, analysts say.

Analysis:

Xiaomi recovered from a bruising 2015-2016 by recalibrating its retail strategy, moving from online-only sales to a multi-channel strategy with a large brick-and-mortar presence. The company also developed an ecosystem of competitively priced branded products to reduce its reliance on smartphones. 


In China, Xiaomi has always had loyal fans attracted to its quirky brand image - a blend of value-for-money and upstart attitude. Founder Lei Jun has never shied from channeling Steve Jobs, whether by appropriating the late Apple founder's dress or designing handsets inspired by the iPhone. 


Of course, like any plucky Chinese consumer electronics brand, Xiaomi isn't content to focus on China alone. Lei Jun knows that for Xiaomi to be taken seriously (mentioned in the same breath as Apple and Samsung), it must crack the U.S. and Europe markets. That's what Samsung did, and it became the world's largest handset maker by shipments. 


It won't be easy for Xiaomi to follow in the Korean electronics giant's footsteps. To begin, Samsung has relied more on strong technology and clever marketing than low prices to build its brand. Further, Samsung began selling mobile phones to U.S. and European consumers before the smartphone era. It has had a long time to build relationships with carriers in those markets - who are the most important sales channel. 


In the view of O2O Brand Protection, Xiaomi should devote more resources to research and development. To be sure, the company has invested in many startups to build out its ecosystem of consumer electronics products, which includes everything from earbuds to air purifiers. Yet that strategy relies on figuring out how to make cheaper products than competitors at near-equal quality, not inventing new product categories or technologies. Because of that, Xiaomi's profit margins are wafer-thin. By contrast, Samsung's are healthy and Apple's are massive. 


As noted by Wired in a December report, IP protection will play an important role in Xiaomi's global prospects. In 2014, Ericsson sued the company in India over Xiaomi's use of technologies to which the Swedish firm claimed ownership. From that costly experience, Xiaomi learned it must secure global IP rights for the technologies used in its products. If it doesn't, it could face a major lawsuit from Apple or another competitor when it launches in the U.S. 


To date, Xiaomi has about 5,700 patents - most created internally. It has also acquired some patents from Nokia and Microsoft.  


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