Chinese Internet business and handset manufacturer, Xiaomi, is preparing for an imminent launch of the devices into the American market. Company vice president, Hugo Barra, has recently been interviewed and has explained that the company can no longer ignore the United States of America, which is the world’s largest smartphone market by revenue. This is not the first time Xiaomi has explained that it is set to launch its smartphones, tablets and now laptops, into the American market but the second half of 2016, the Chinese business is in a better position to do so. This is in part due to it having acquired 1,500 technology patents from Microsoft in June, which it may use to help avoid legal entanglements with competitors as it attempts to break into the North American market. Xiaomi has already started selling goods into the American market such as headphones and battery chargers, which has helped established the brand name.
Xiaomi is planning on using a combination of social media and online direct sales in order to appeal to the younger generation, which is where Xiaomi are targeting their products. The company believes that the younger generation’s enthusiasm for new technology should provide them with an opening. On the subject of timing, Hugo explained that the company does not have a timetable other than “in the near future” but instead it will need to time things very carefully. Xiaomi is presumably hoping to repeat the success it is enjoying in India, where after a number of false starts the company is reputed to be selling well. However, India is a very different market to America: it has low levels of smartphone penetration, smartphone prices are low and the country’s carriers are still investing and rolling out their 2G, 3G as well as 4G LTE networks. The American market is very different because the majority of consumers are already on their second or subsequent smartphone. The established market leaders of Apple and Samsung have considerable marketing budgets and expertise at dealing with the American carriers as a way of selling their devices to customers.
Xiaomi is facing intense competition in its domestic (Chinese) market through competitors such as Huawei, Vivo and ZTE. Huawei, in particular, have enjoyed a very successful eighteen months. The company manufacturers the 2015 premium Nexus 6P handset along with the Huawei Watch, a premium Android Wear device. Huawei and ZTE have both managed to sell some of their products through America’s carrier network, which is an area Xiaomi may need to break into if it is to enjoy a commercial success. To date, Xiaomi’s smartphone business has been managed and run on a very slender margin (reputed to be under 2% for 2013 although as Xiaomi is a private company, information is sketchy) as the company earns more money through add-on services. This is one reason why Xiaomi’s smartphones are very competitively priced and often offer more for the money compared with alternative handsets. Xiaomi’s privately owned business operates in a different way to many other smartphone manufacturers.
Nevertheless, the American market is changing: almost all consumers now buy their devices via a regular monthly contribution based on the handset cost, rather than bundling in the cost of the device as part of the monthly plan sum. This means that there are cost advantages associated with buying a less expensive device and carriers are seeing more mid-range devices being sold as a result. Xiaomi have a successful range of mid-range devices. We may see Xiaomi innovate in ways to sell smartphones to customers to take advantage of the changes in the current smartphone market.