Designing a high-performance smartphone, however, is one thing. It's entirely another to find "top suppliers" of advanced parts and components willing to sell to Xiaomi -- a brand nobody has heard of. Even more difficult, it turns out, was to find a company that can do the assembly and production for Xiaomi-designed products.
Together with Lei or his top lieutenant, Lin traveled everywhere, knocking on the door of key vendors -- seeking the best components for a high-performance smartphone. For sourcing LCD screens, they went to Sharp, Toshiba, AU Optronics, and Innolux, according to Lin.
Practically 80% of parts suppliers said no, according to Lin. Foxconn said no. Some companies told Lin they had no capacity, while others quoted a price five times higher than usual. "That means no," said Lin.
For displays, Sharp resisted before finally signing on. "A guy at Sharp later told me that they only said yes, because a high-level executive from Japanese distributor -- Mitsui -- came along with us," said Lin.
The biggest hurdle, however, was to find a company that could assemble Xiaomi's smartphone. Lin remembers talking to a colleague, before the meeting, "If we can't get these guys, we're dead."
Bin Lin, Xiaomi's co-founder and President.
(Source: EE Times/Junko Yoshida)
Startups don't succeed just because they have well laid-out plans. Usually, there's a lucky break. This time, it was Inventec Appliance Corp., a company producing its own mid-range phones while offering electronics manufacturing services to other companies. Xiaomi's visit coincided with the impending demise of Inventec's faltering phone business.
Xiaomi's smartphone design required a manufacturer to pack 10 layers of PCBs in a tiny space. It meant Inventec would need to make a large investment in new test equipment. Despite that, Inventec -- facing a huge setback unless it partnered up -- agreed to work with Xiaomi.
Follow Internet company business models
Separating Xiaomi from traditional CE vendors are their Internet-driven philosophies.
First, Xiaomi believes that the price of a system should be the same as that of cost. "That should be the standard [practice] for hardware," said Wanqiang Li, one of the co-founders of Xiaomi, during his speech at the CEO Summit held this week by Global Sources in Shanghai. In his opinion, "high volume" and "lower price" are the two factors driving Internet companies like Baidu. CE companies of modern days should follow their example, he noted.