China’s Xiaomi prepares to enter the US smartphone market

August 22, 2016 06:00 AM

(Bloomberg)—Xiaomi Corp. is preparing to enter the U.S. smartphone market “in the near future,” employing the same online sales and social media marketing tactics that helped the six-year-old startup become China’s largest privately funded startup.

Xiaomi, No. 3 in the Internet Retailer 2016 China 500, can no longer afford to ignore the world’s largest smartphone arena by revenue, company vice president Hugo Barra said in an interview. Its international expansion is taking on new-found urgency as growth at home slows and rivals such as Huawei Technologies Co. erode its market share.

“The U.S. is a market that we definitely have in our sights,” Barra said on Bloomberg Television. “We will lead with social media, with the channels that allow us to get in touch with the young generation that are enthusiastic about new technology. We are definitely going there.”

Barra, who oversees the Chinese company’s international expansion, has signaled Xiaomi’s U.S. debut before. But the smartphone vendor is now in a better position to launch an incursion onto Apple Inc.’s turf. In June, the Beijing-based company announced the acquisition of nearly 1,500 technology patents from Microsoft Corp.—a deal that may smooth potential legal tangles over intellectual property as it pushes abroad.

Xiaomi, whose plethora of products include smart bikes and rice-cookers, has no timetable for a U.S. launch, Barra said. It already sells products such as earbuds and fitness bands to Americans online, its preferred sales method.

“The U.S. is a very important market for any consumer electronics and lifestyle brand, certainly for us as well. Obviously we’ve got to time things carefully.”

But Xiaomi may have trouble breaking into a market dominated by Apple, No. 11 in the China 500, and Samsung Electronics Co., No. 658 in the Internet Retailer 2016 Global 1000. Smartphone sales are also largely controlled by telecommunications carriers such as Verizon Wireless and AT&T Inc., a channel with which Xiaomi has limited experience. Rivals such as Huawei (No. 12 in the China 500) and ZTE Corp. (No. 48) are also increasingly targeting American consumers.

“The technology bar in the U.S. is much higher than in Xiaomi’s current major markets, which means it takes a lot more to get into that market,” said Nicole Peng, China research director of Canalys, a consultancy. It will also have to consider the economics of such a move. “It will not make sense for Xiaomi to enter a market that is not profitable."

For now, the largest overseas market for Xiaomi is India, a country with over 1.2 billion people on the cusp of a smartphone boom. Barra said the online market in India, which has been Xiaomi’s primary focus, is growing “very, very well.”

Xiaomi needs a win in India. It’s steadily losing ground to local competitors like Huawei, Oppo and Vivo. In a report this month, IDC estimated Xiaomi shipped 10.5 million smartphones in China in the second quarter, a fall of 38% from a year earlier.

Barra however dismissed the figure as “not accurate.” Xiaomi shipped just under 7 million units in June alone, he added.




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