BEIJING — China's Xiaomi Inc., a company with no previous experience in the CE business, has picked up where Sony, Motorola, and Nokia left off and has blazed a path to survival in today's cutthroat consumer market.
Xiaomi's strategies, which defy most of the industry's conventional wisdom, seem to be working so far. The company is gaining millions of enthusiastic Xiaomi fans -- though still mostly in China. Two years after its inception, it sold 7.19 million smartphones in China in 2012, bringing in 12.6 billion Yuan ($2.049 billion) in revenue. In 2013, it sold 18.7 million smartphones and generated 18.7 billion Yuan ($5.074 billion) of revenue.
The counterintuitive steps Xiaomi has taken on its way to dominating the market here are many. It has priced its high-performance phone for less than its bill of materials. It sells only on the Internet (no retail stores or third-party distributors). It uses no ODMs to design a box. It limits its range of models, and it maintains a longer product cycle. It thrives on frequent software updates -- on a weekly basis.
Xiaomi also makes a point of disclosing the names of suppliers for every part and component designed into its products. "Traditional handset vendors treat such information as if it were trade secrets," Bin Lin, co-founder and president of Xiaomi, told us during a recent one-on-one interview. "We don't. For an Internet company like ours, the disclosure makes our products more transparent, which we think is the key to win trust from our customers."
Bin Lin, Xiaomi's co-founder and president, in his office in Beijing.
Smartphones aren't the only CE product Xiaomi is selling in China. Though every major consumer electronics company in Japan and Europe seems to be fleeing the TV business, Xiaomi launched Xiaomi TV and the Xiaomi over-the-top box last year. Late last year, it rolled out a WiFi router featuring Broadcom's dual-core 1GHz CPU, 802.11ac running at dual bands (2.4 GHz and 5GHz), and a 1 TB 2.5-inch SATA hard drive. Lin said the Linux-based smart router could be Xioami's first product to enter the US market -- if it chooses to take the plunge. Xiaomi also offers a number of accessories, including portable chargers.
Xiaomi's almost fanatical focus on Internet sales is much noted. This marketing strategy has become legend and gospel in China. By coming out of nowhere to take China's smartphone sector by storm in less than three years, Xiaomi reminds many Western analysts of Steve Jobs and the iPhone launch.
Who's who in the mobile technology
The less-told tale is Xiaomi's technology prowess, backed up by the team's collective knowledge on software and hardware -- down to granular details.
The seven co-founders include the crème de la crème of engineering talent from China's King Software, as well as management heavyweights from Google, Microsoft, and Motorola. If you've ever wondered whatever happened to the top Chinese engineering lieutenant at Microsoft Research Asia (founded in Beijing in the late 1990s), the director of Microsoft China's Academy of Engineering, or the guy who established an R&D Center for Motorola China in late 1990s, Xiaomi's your answer.