The additional $725 million will be spent on reward programs for sales employees and retail partners as well as expanding Xiaomi's distribution channels. What this means is that Xiaomi will look for more places to sell its products and reward partners and sales employees for their efforts.
Xiaomi is currently fourth in the country in terms of smartphone sales, but it wants to rise one spot to No. 3. It is currently behind Samsung, Huawei, and Apple in the country. The company holds 12% of the Chinese smartphone market, dwarfed by Huawei's own 34%.
Xiaomi's sales declined by a small percentage in Q1 2019, from 27.8 million smartphones sold in Q1 2018 to 27.5 million sold in Q1 2019, securing 8% of the Chinese market, while its Shenzhen-based competitor rose 41% and held 19% of the Chinese smartphone market in the same quarter. Huawei, due to its financial ban in the US, looks to increase its hold on the Chinese smartphone market from 34% to 50% to make up the profit difference.
Xiaomi's decision to double-down on its retail investment comes with the planned, strategic rise of Huawei in China. The Shenzhen-based rival is currently facing its own string of difficulty, the hardest hit yet coming from the Trump Ban and its placement on the US Entity List just last month. Xiaomi, like Huawei, sees the rise of 5G wireless technology as a trending area in which to invest and secure needed monies to grow its share.
Xiaomi will have a difficult time with 5G, though, as Huawei owns the most 5G patents of all global companies (15%). Even without selling in the US, Huawei will still recoup money from 5G patent royalties. Recently, Huawei has waged economic warfare against the US, telling US carrier Verizon Wireless to hand over $1 billion in 5G patent royalties it owes Huawei.
Trump has banned Huawei and some 60 subsidiaries from selling and doing business with US entities and companies, meaning that US businesses cannot partner with nor do business with Huawei. Huawei has said this week it will lose some $30 billion over the next two years because of the Trump Ban, though the company's president said that Huawei will not delay R&D projects nor lay off employees as a result.
Under the Trump Ban, Huawei has also received an Android license revocation, something issued by Google just days after the Entity List was announced. Huawei, thus, will no longer have access to Google apps such as Maps, Gmail, Docs, Sheets, Slides, or even Android system updates such as Android 10.0 Q when the ban and revocation become effective August 19th. Huawei is not only calling in 5G patent royalties but is also considering the creation of a second sub-brand, "Nova," to accompany its current "Honor" sub-brand to increase funds.
Along with its desire to increase Chinese smartphone market sales, Xiaomi looks to follow in the footsteps of Android giant Samsung and release a foldable smartphone of its own. The phone could be called "Mi Fold" or "Mi Flex" and could fold outward in two places, as opposed to Samsung's folding inward in one place. Xiaomi will use Visionox Technology's OLED panels, as opposed to Samsung who uses its own AMOLED panels for its devices.
Xiaomi's Mil Fold or Mi Flex is expected to cost half the price of Samsung's Galaxy Fold, which is currently priced at $1,980. Huawei's Mate X foldable smartphone will cost $2,600. Xiaomi's, in contrast, could cost no more than $999 USD when it launches. Huawei says in light of the Trump Ban and blacklisting that its foldable Mate X could still arrive to market, though whether or not it will run Android 9.0 Pie or even Hongmeng OS (Huawei's trademarked OS in China) is anyone's guess.