Xiaomi Phenomenon: Become the Third Smartphone Manufacturer
Only four years ago, Xiaomi did not have a single phone. Today, this startup is estimated at $ 45 billion and is the third in the ranking of the largest manufacturers of smartphones, while the cost of flagships is almost two times lower than the cost of competing devices - Apple and Samsung. Recently, the company, which is often described as “Chinese Apple”, introduced several new devices, including top-of-the-spec (but not for the price) Mi Note phablets, created as competitors to the iPhone 6 Plus.
The combination of powerful iron and low prices allowed the company to sell more than 60 million devices in 2014, displacing Samsung from the position of a leader in the Chinese market. The rapid rise makes Xiaomi a powerful competitor to Apple, for which this market is of great interest. For now, Xiaomi ignores the United States, but this does not mean that at one point, an ordinary American cannot brag about Chinese smartphones without a bitten apple on the case.
This year, the company introduced several devices, including the Mi Note. The new phablet has a 5.7-inch display, protected by a rounded Corning Gorilla Glass 3 glass, 6.95 mm thick and comes with a battery with a capacity of 3200 mAh. Responsible for the pictures are the 4 megapixel front camera and the main 13 megapixel camera with a wide aperture and optical image stabilization. The customer can choose the desired Snapdragon processor, 3 GB or 4 GB of RAM, 16 GB or 64 GB of storage space and a display resolution of 1080p or 1440p.
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Mi Note Pro can be the best smartphone that will hit the market this year. Iron is more powerful than the iPhone 6 Plus, the quality of the photo is comparable to the HTC One. Add to this the sound quality, support for super-fast LTE latest specifications and two SIM cards - micro and nano.
The price of the base model will be $ 370, and the model with the highest performance will cost $ 520. While competitors, Apple and Samsung, offer flagships for as low as $ 1,000. What is the secret why Xiaomi does not raise prices? There are many theories on this score, including the idea that Xiaomi sells devices at cost and earns on other services. The veil of secrecy in an interview for TechCrunch was revealed by the vice-president of Xiaomi, Hugo Barr, who left Google's vice-president from his old place as a young startup.
Hugo Barra explained the company's ability to keep prices at this level with a small portfolio and a long period of selling devices. Xiaomi continues to sell old devices and service them after the release of new models.
The long term sale of devices allows Xiaomi to enter into more profitable companies with component suppliers. When the cost of components becomes lower than enough for Xiaomi, the prices of the devices decrease. Since the vast majority of components in the devices are the same, from the point of view of the supply chain and the search for components, the company with the Redmi 2 smartphone has the same relations with suppliers, as is the case with Redmi 1. That is, the new Xiaomi smartphone gets the same discounts on accessories.
Barra noted the importance of a small number of models: Xiaomi for the year launches only a few products of this type and has only two families of smartphones, while Samsung last year released 56 smartphone models , helping out 49% less money than in 2013. Sales of a small number devices for two or three years allows not only lower prices, but also take better care of the consumer: Xiaomi tries to update the software more often than most competitors.
There are other factors that allow you to control the cost structure, including the company's marketing focus on online sales, as well as the company's proximity to manufacturing plants in China. But the most important element is the management of the supply chain of components.
The company makes smartphones for China, Taiwan, Singapore and other countries of Southeast Asia. Overhead costs are reduced by selling devices online. Xiaomi offers competitive prices through the use of components from a large number of different suppliers.
Fans of the company consider Xiaomi a cool local brand. Presentations of new products are held as rock concerts, besides the company is very active in social networks. Open communication sometimes helps the company to get rid of problems: when information appeared that Xiaomi collected contacts from customers' phone books without the permission of users, the company did not shirk and simply apologized and changed default settings.
If you look at the company's activities with a more cynical look, then Xiaomi’s success lies in the fact that it pulled together the products of other companies.
Xiaomi CEO Lei Jun hates it when the company is called “Chinese Apple”. He likes to talk about the small similarities with Amazon and Google. But such a comparison exists, because there are similarities between products from the iPhone manufacturer and Xiaomi devices. Externally, the Mi Pad tablet is an exact replica of the iPad Mini, and some see in the Mi fablets the characteristic features of the iPhone 6 Plus. Not to mention the fact that Android devices have bright colors and a flat design similar to iOS.
An ordinary consumer is more interested in another component of smartphones - their price. In China, the cheapest model of the iPhone 6 Plus will cost $ 1,000, while the Mi Note costs $ 370 for the basic version and $ 520 for the “pro” version.
New Mi Note will be launched in Taiwan next quarter, after which they will start other markets, but not the United States. The company is already working in this direction, but so far it has an important problem: patenting. Components of smartphones and their design need to be patented, while Xiaomi does not have all the necessary patents. So the company will first have to spend huge amounts on licensing before it can sell smartphones in the United States and Western Europe. For a company that sells products just above cost, it will be difficult.
In any case, smartphones are only part of Xiaomi's business. The company takes the smart home seriously and sells the connected electronics through Mi.com. This electronics works MiUI - Android user interface. In 2013, Xiaomi announced MiTV , then routers , and in the spring of 2014 introduced air humidifiers . On the way - water purifier.
The company has big plans to expand beyond Asia this year, which will make the pricing model and supply chain more important to Xiaomi than ever.
In most markets, Xiaomi sells phones using an online-only model, but it also tries other tools — working with operators. This model is being tested in India, partners have already been found in Taiwan, in Malaysia and Singapore.
The Vice President notes that partnership with operators is difficult in markets where the consumer prefers prepaid tariffs - like in India - but for Xiaomi, you still need to find your way in retail. In the first five months of operation in India, the company sold a million units using flash sales. If Xiaomi moves further to meet the needs of customers in India and other emerging markets, this may significantly increase sales in 2015. Last year, the company promised to sell 100 million devices. Let's see how they do it.
The combination of powerful iron and low prices allowed the company to sell more than 60 million devices in 2014, displacing Samsung from the position of a leader in the Chinese market. The rapid rise makes Xiaomi a powerful competitor to Apple, for which this market is of great interest. For now, Xiaomi ignores the United States, but this does not mean that at one point, an ordinary American cannot brag about Chinese smartphones without a bitten apple on the case.
How can a flagship cost from $ 370?
This year, the company introduced several devices, including the Mi Note. The new phablet has a 5.7-inch display, protected by a rounded Corning Gorilla Glass 3 glass, 6.95 mm thick and comes with a battery with a capacity of 3200 mAh. Responsible for the pictures are the 4 megapixel front camera and the main 13 megapixel camera with a wide aperture and optical image stabilization. The customer can choose the desired Snapdragon processor, 3 GB or 4 GB of RAM, 16 GB or 64 GB of storage space and a display resolution of 1080p or 1440p.
')
Mi Note Pro can be the best smartphone that will hit the market this year. Iron is more powerful than the iPhone 6 Plus, the quality of the photo is comparable to the HTC One. Add to this the sound quality, support for super-fast LTE latest specifications and two SIM cards - micro and nano.
The price of the base model will be $ 370, and the model with the highest performance will cost $ 520. While competitors, Apple and Samsung, offer flagships for as low as $ 1,000. What is the secret why Xiaomi does not raise prices? There are many theories on this score, including the idea that Xiaomi sells devices at cost and earns on other services. The veil of secrecy in an interview for TechCrunch was revealed by the vice-president of Xiaomi, Hugo Barr, who left Google's vice-president from his old place as a young startup.
How does Xiaomi keep prices so low?
Hugo Barra explained the company's ability to keep prices at this level with a small portfolio and a long period of selling devices. Xiaomi continues to sell old devices and service them after the release of new models.
A product that remains on sale for 18-24 months - like most of our products - goes through a threefold price reduction. Mi2 and Mi2s are essentially the same device. Mi2 / Mi2s have been on sale for 26 months. Redmi 1 was launched in September 2013, and just now we announced Redmi 2 - 16 months later.
The long term sale of devices allows Xiaomi to enter into more profitable companies with component suppliers. When the cost of components becomes lower than enough for Xiaomi, the prices of the devices decrease. Since the vast majority of components in the devices are the same, from the point of view of the supply chain and the search for components, the company with the Redmi 2 smartphone has the same relations with suppliers, as is the case with Redmi 1. That is, the new Xiaomi smartphone gets the same discounts on accessories.
Barra noted the importance of a small number of models: Xiaomi for the year launches only a few products of this type and has only two families of smartphones, while Samsung last year released 56 smartphone models , helping out 49% less money than in 2013. Sales of a small number devices for two or three years allows not only lower prices, but also take better care of the consumer: Xiaomi tries to update the software more often than most competitors.
There are other factors that allow you to control the cost structure, including the company's marketing focus on online sales, as well as the company's proximity to manufacturing plants in China. But the most important element is the management of the supply chain of components.
How does the company work with consumers?
The company makes smartphones for China, Taiwan, Singapore and other countries of Southeast Asia. Overhead costs are reduced by selling devices online. Xiaomi offers competitive prices through the use of components from a large number of different suppliers.
Fans of the company consider Xiaomi a cool local brand. Presentations of new products are held as rock concerts, besides the company is very active in social networks. Open communication sometimes helps the company to get rid of problems: when information appeared that Xiaomi collected contacts from customers' phone books without the permission of users, the company did not shirk and simply apologized and changed default settings.
Cynical view of success
If you look at the company's activities with a more cynical look, then Xiaomi’s success lies in the fact that it pulled together the products of other companies.
Xiaomi CEO Lei Jun hates it when the company is called “Chinese Apple”. He likes to talk about the small similarities with Amazon and Google. But such a comparison exists, because there are similarities between products from the iPhone manufacturer and Xiaomi devices. Externally, the Mi Pad tablet is an exact replica of the iPad Mini, and some see in the Mi fablets the characteristic features of the iPhone 6 Plus. Not to mention the fact that Android devices have bright colors and a flat design similar to iOS.
An ordinary consumer is more interested in another component of smartphones - their price. In China, the cheapest model of the iPhone 6 Plus will cost $ 1,000, while the Mi Note costs $ 370 for the basic version and $ 520 for the “pro” version.
Why in the US will not see Mi Note?
New Mi Note will be launched in Taiwan next quarter, after which they will start other markets, but not the United States. The company is already working in this direction, but so far it has an important problem: patenting. Components of smartphones and their design need to be patented, while Xiaomi does not have all the necessary patents. So the company will first have to spend huge amounts on licensing before it can sell smartphones in the United States and Western Europe. For a company that sells products just above cost, it will be difficult.
In any case, smartphones are only part of Xiaomi's business. The company takes the smart home seriously and sells the connected electronics through Mi.com. This electronics works MiUI - Android user interface. In 2013, Xiaomi announced MiTV , then routers , and in the spring of 2014 introduced air humidifiers . On the way - water purifier.
Plans for expansion
The company has big plans to expand beyond Asia this year, which will make the pricing model and supply chain more important to Xiaomi than ever.
In most markets, Xiaomi sells phones using an online-only model, but it also tries other tools — working with operators. This model is being tested in India, partners have already been found in Taiwan, in Malaysia and Singapore.
The Vice President notes that partnership with operators is difficult in markets where the consumer prefers prepaid tariffs - like in India - but for Xiaomi, you still need to find your way in retail. In the first five months of operation in India, the company sold a million units using flash sales. If Xiaomi moves further to meet the needs of customers in India and other emerging markets, this may significantly increase sales in 2015. Last year, the company promised to sell 100 million devices. Let's see how they do it.
Source: https://habr.com/ru/post/283592/
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