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Where do we see Xiaomi 3 years from now - Will Facebook join?

P

Pawan Fangaria

New member
Xiaomi has been seen on rapid growth!
In Aug 2013 it was valued at $10 Billion.
Last month after $1.1 Billion fund raising, today we see it at $45 Billion value -
http://dealbook.nytimes.com/2014/12/29/xiaomi-chinese-phone-maker-valued-at-45-billion/?_r=0

What a meteoric rise!

A few months ago, Facebook's Mark Zukerberg and Xiaomi CEO Lei Jun met in Beijing.
Zukerberg wanted to invest in Xiaomi, but political and commercial implications in the face
of Facebook remaining banned in China since 2009 are holding him back.

With rising maturity of Smartphone and tech market in China, do we see the situation easing and
Xiaomi rising further globally?
 
Xiaomi has a very narrow moat and is just another commodity smart phone company open to competition. They have a COSTCO like business model that could be easily duplicated and need to develop an ecosystem to differentiate themselves. They are bringing out a 4K TV and if they integrated the TV and phone together they could have the start of a serious ecosystem. Xiaomi has no time to waste and we should see how quickly they can build a moat before the competition moves in. A COSTCO business model on top of an integrated ecosystem across an expanding product line could be a real winner.
 
Yes, today they are looked at as commodity smartphones, but I hear their phones are doing great, although I do not have one. Am planning to buy one for my wife, it's kind of wait in the queue :) How I view it is smartphone has provided them the push. In the long run they will have to connect to not only TV, but other consumer devices as well to remain in the business.

Good that they are starting with TV. They know about this, I am told that they are also working with IoT chain. It has to be seen, how they come up. Considering value chain connecting with multiple devices, they will have to face serious competition with Samsung, Apple... Their COSCO model with only one or two commodities will not work.
 
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One the one hand, xiaomi are building their ecosystem, and fast , with a strategy to launch 100 product categories , that would be targeted towards their current fans(they have created many fans for their brand in asia), that will be interoperable using the IOT, use their mobile phone as a sales channel. Those are pretty decent advantages , if they succeed.

And also , let's not forget, their strategy is disruptive - selling online-only, direct to manufacturer only at lower prices. For someone like samsung ,that means destroying or harming key relationships with retailers and seeing a big drop in profits.

On the other hand, a few comapnies: lenovo, huawei and others are working on emulating their business model, with and huawei already sold million of such phones using such methods.

Any , this will be an interesting battle, that will dictate the business model of future consumer electronics companies, surely in emerging markets and probably in the west.

And in general, it might lead to direct-to-manufacturer business model across many sectors of the economy, where the retailer roles are outsourced - warehousing to some low-cost 3rd party logistics company, and web site(and traffic generation) to someone like the new startup jet.com(which charges customers $40 yearly memberships for getting the lowest cost prices, and offers any eCommerce seller a possibility to be displayed , for free).
 
While Xiaomi is working on it, Samsung seems to be ahead of game in IoT strategy. They have clear advantage as far as presence in consumer electronics is considered - phone, watch, TV, Refrigerator, washing machine, camera,..... And there new acquisition SmartThing showcased new SmartHome hub that connects to all sensors in a home and it can work even in case of outage of power or internet with built-in backup battery.

However, with Facebook kind of giants joining Xiaomi, it can deliver much faster considering its execution track record. So, there has to be a tough battle.

On business model - on-line model is good in developed countries. In developing ones, there is no infrastructure to support that kind of service. So, there has to be a mix of both - on-line and in-store to get a win. While Xiaomi has to build in-store presence, Samsung (and for that matter others as well) has ro build on-line presence. Xiaomi has already started selling its Redmi through Airtel internet service provider stores in India.
 
Yes samsung is a fierce opponent. But again competing online only vs stores+online is not a fair competition.

As for xiaomi on airtel - i don't know the details, but it could be that airtel makes little money from the xioami device, but it greatly helps them with getting users. On the other hand , most carriers expect some profit from a samsung phone, and most stores take a revenue share from a Samsung appliance sold through them.
 
Lenovo is splitting off its mobile division and is going to use the same direct to consumer online model Xiaomi is using. Others will soon follow. Like I have said, Xiaomi has a very narrow moat and others will copy the model. From today's Barrons
 
I agree with Arthur, other will have to follow on-line model. However, in a place where on-line is not very successful, the phone or system makers must not stand idle and on-line comes as a hindrance. The market window is short, they need to keep options open. Of course will minimum profit margin for store owners or let's say some kind of service providers like Airtel for Xiaomi who need to promote their service as well. In the E-commerce world, the store owners will be wary, they cannot resort to large margins in order to survive.
 
Xiaomi plans to take on Apple and Samsung in higher-end Smartphones as well, of course at lower prices than them.
Later in this month, it's said to launch 'Xiaomi Note' for $371. It's 5.7", larger than iPhone 6 Plus, but lighter and thinner. It has curved display.
Another Xiaomi model Note Pro will be prices at ~$532

Lei Jun is striving hard to overtake Samsung and Apple in Smartphone business in a decade from now.

Well, a decade is too long as IoT, connectivity between devices is going to change many equation in near future. We need to see where Xiaomi goes in next 3 to 5 years, of course with its plans on Smartphones as well as IoT. I guess, if is able to lower the value in terms of price and increase the value in terms of quality for top-end mobile devices and set new standards, then it can. Comments?
 
Vance Jen

Xiaomi will fall in 3-5 years, maybe sooner. So far their success was mostly domestic, no international success.

In CE space, the long term success is based on a proven, mature company culture that focus on innovation and focus. So far Xiaomi's innovation is on their business model which is easy to be duplicated by others. People pay attention to Xiaomi because they are "fresh." And fresh is short lived.
 
Pawan Fangaria

To a certain extent yes, they are following up with Apple and Samsung on features, innovation.... that can be duplicated. But a lower cost. So if you take a cost leadership model who can provide equal feature, quality at lower cost, they can be a serious contender.


On the other hand they are investing in start-up companies who can do new things in hardware / software, apps etc. So, with investment from big companies like Facebook and innovation from start up, they may come up in innovation space (which can be disruptive) as well. We'll have to see...
 
Pawan, I hear that xiaomi is opening service centers in india. My guess is that they would be low cost, and would probably earning nothing to enable xiaomi to show phones where needed, and fix them when needed. I don't think regular stores could compete with that by just lowering their margins.
 
Arthur, in general you're right , xiaomi realy need to work on it's moat.

But selling phones online only by lenovo is one thing. But will they go the full all way, and sell everything(including appliances) online-only(or online-mostly) at online-only prices, and do it fast enough for xiaomi not to gain substantial advantage ?

Because it will require a huge change, and probably some losses from lenovo.And even than, there's a possibility for xiaomi to have some part of the market that will be enough for them.
 
ippisl said:
Pawan, I hear that xiaomi is opening service centers in india. My guess is that they would be low cost, and would probably earning nothing to enable xiaomi to show phones where needed, and fix them when needed. I don't think regular stores could compete with that by just lowering their margins.
Click to expand...

For service, I see very small service operators for mobile phones / smartphones everywhere in India who provide services for all kinds of smartphones (Xiaomi included) at very nominal prices. So, that would not make any difference, but initial quality will. However, your point is valid, if Xiaomi opens its own service centers on top of these small centers and provides professional services at those low prices, it will be added advantage.
 
LinkedIn said:
Vance Jen

Xiaomi will fall in 3-5 years, maybe sooner. So far their success was mostly domestic, no international success.

In CE space, the long term success is based on a proven, mature company culture that focus on innovation and focus. So far Xiaomi's innovation is on their business model which is easy to be duplicated by others. People pay attention to Xiaomi because they are "fresh." And fresh is short lived.
Click to expand...

Paul McLellan

Come on. This is like saying iPhone's success was "mostly domestic". Which it was originally.

Yes, they need more carrier relationships (especially if they want to enter the US market) but they are #1 in the #1 market in the world. It wouldn't surprise me if they get to be #1 in India too. The US is 300M people. China and India together are around 8 times the size. Sure, lots of them are poor. All the more reason to buy a cheap smartphone rather than an iPhone or a Samsung Galaxy.
 
This Saturday was a day for me to do some pending domestic items. I bough a Google Android1 smartphone for my mid teenager daughter and went to Airtel service provider store to get the phone activated with a new number. I got a chance to enquire about Xiaomi's Redme Note (I'm planning to replace my wife's old phone too), which I knew is being sold by Airtel stores. They said, it's the fast selling phone, no stock, you have to order in advance and be in queue :( Same story on-line, you have to book and wait. What a sale of Xiaomi phones in India! No surprise, if they become number one in India!

The other story - I overheard a conversation between a disgruntled phone owner and a service provider sitting near by - Nokia phones (which he was getting repaired) are worst, even lumia is not good. I just want to change my phone to Apple once for all.

Apple still rules in quality in India too! Need to see how long the high price mark will work.
 
Paul Dyer

Being a mature and proven company in the CE market space is irrelevant. Historically strong Western brands and companies meeting this description have declined and all but disappeared from the playing field over the last few decades. Quality and innovation are also not major factors since these things can be proudly found elsewhere and relatively easily learned and replicated. The only thing that matters in the long term is volume and price, which is highly dependent on operating costs. So Xiaomi has a massive advantage over Apple; they are operating from a far lower cost base than Apple can reach. Samsung is more of a challenge in this sense but Xiaomi still has a significant advantage at present. The market is theirs to win or lose.
 
That's exactly the point. If Xiaomi can break that Price/Quality ratio, it's going to be the winner. People will go for Xiaomi for same quality at lower price baring some conspicuous people who would preserve that niche segment for Apple.
 
With regards to the iphone as a status symbol , i wonder: could xiaomi phones show in some nice way how many expensive xiaomi appliances have you bought , and thus serve also as a status symbol - attacking the iphone at his home front ?
 
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