How Big of a Threat is China’s Xiaomi to Apple? (Bloomberg)
While nearly all smartphone consumers and technologists outside of China or Southeast Asia have probably never heard of Chinese mobile maker Xiaomi, the company is being billed as that country’s answer to Apple and a potential force to be reckoned with (both inside and outside of China) in the coming years.
“Xiaomi Rising:” Bloomberg West
Former Google Executive Crid Yu, Bloomberg Businessweek’s Brad Stone and Bloomberg’s Cory Johnson recently took an in-depth look at China’s Xiaomi on Bloomberg Television’s “Bloomberg West.” Note: This first clip runs for about 42 minutes – meaning you might want to take a look at some of the shorter clips I have posted below it that do a good job of summarizing some of the key points from the episode (In addition, check out: Xiaomi Smartphones Are Coming to an Emerging Market Near You (Bloomberg / Tech in Asia)):
Is Xiaomi Really the Apple of China?
In this Bloomberg clip, it was noted that Xiaomi has a very different business model as they sell their products only online (cutting out the retailer’s 25% margin) and they don’t advertise – relying instead on social media. Xiaomi executives are also a dream team of well known Chinese technologists.
The problem is that Xiaomi has grown very fast and while it has sold 18 million smart phones, it has also left a lot of customers disappointed because the phones can be hard to get as the company quickly outgrew its supply chain with supplies sometimes selling out in seconds online. However, this has also meant that Xiaomi has not gotten stuck holding unsold mobile inventory that becomes more and more out of date and worthless by the day:
How Big a Threat Is Xiaomi to Apple?
In this Bloomberg clip, it was noted that Apple products are expensive in China with the iPhone 5c selling for $700-$800 – meaning its easy for Xiaomi to come in and underprice it. However, Samsung is still the number one smartphone seller in China while Xiaomi comes in at number three and Apple is number four:
How Can Xiaomi Sell Its Phones So Cheaply?
In this final Bloomberg segment, it was commented that Xiaomi rides the cost curve down as they start selling the mi3 and break even. The phone has a year-long lifecycle and by the end of it, they are making a 15% margin. They also try to make some money from different types of services and use software updates (as in every Friday) to keep the phone current:
- Xiaomi Smartphones Are Coming to an Emerging Market Near You (Bloomberg / Tech in Asia)
- Lessons from Autohome Inc’s Battle With Foreign Shareholders (Bloomberg)
- Both Apple and Android Use is Growing in Chinese Third-tier Cities (Tech in Asia)
- Private Equity Firms in Southeast Asia Are Cashing Out Faster (WSJ)
- What Justifies Xiaomi’s Proposed IPO Valuation of US$100 Billion? (The Asset)
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- Why a Financial Crisis is NOT Brewing in China (Institutional Investor)