Google get it. Xiaomi get it. Lenovo too. Samsung don’t, HTC probably don’t either and Apple; well they don’t care. What am I writing about? Inexpensive devices for the developing world; inexpensive devices for customers buying their first smartphone. Android has reached a billion users but most of these are in the developed world. Google Android One is designed to appeal and sell to the next billion by offering an inexpensive, reasonably well specified bundle of concentrated Android goodness to customers in developing countries. I’m writing about devices that cost under $100 outright.
Xiaomi and Lenovo have experience selling devices at this price point. Samsung and HTC haven’t had the same kind of success. Apple won’t get out of bed for several times this. Both Xiaomi and Lenovo have their own smartphone business that has already stepped into this end of the market, as well as Xiaomi planning Android One devices. So let’s take a look at Xiaomi and Lenovo to see how they’re competing against the established names in developed markets. And the simple answer is that these businesses understand their market better than the global superpowers of the smartphone world.
I’m going to discuss Xiaomi first. The business sells low cost ‘phones but makes most of its revenues from associated services – books, applications, games – that it also sells to users. Does this sound familiar? It’s similar to how parts of Google’s business model operate. And if we exclude the sky high margins and pricetags of Apple’s devices, Apple have a toe in this market too. Lenovo also sell inexpensive but reasonably high end devices and now they own Motorola, have something of an advantage in the developed markets, where Motorola is a far more acknowledged brand. Both Xiaomi and Lenovo have succeeded by offering customers more for their money (in some cases, more for less money) compared with the competition. By more, I mean everything from the quality of the product, the interface and raw box specifications.
Samsung in particular also operate in the emerging markets, but because they’re a global player trying to squeeze their global portfolio into a particular region, they are suffering. We’ve seen their sales and profits fall this year: Samsung’s electronics divisions are trying to sell everything to everybody but this loses some of the point in the developing market, where customer budgets stretch to a smartphone rather than the curved panel smart television.
What’s next for Xiaomi and Lenovo? Naturally enough, going after the upgrade market in the more developed markets. This means being adopted by the carriers, joining Huawei and ZTE, which have already invested considerable time and effort getting in front of carriers to offer their products. Certainly, Xiaomi and Lenovo’s recent devices are as good as the establishment, but will carriers take on another device manufacturer? There’s space for more inexpensive entries, but Xiaomi (especially) are not going to want to sit alongside the prepay inexpensive devices: they’re going after the iPhones, S5s and Ones of this world.