Xiaomi’s $45bn formula for success (and no, it’s not ‘copy Apple’)
There’s an easy-to-miss showroom on Maofang Road, in north Beijing’s Haidian District, where you can lean over long pale-wood Apple Store-type benches to play with familiar-looking Mi Pads and Mi phones, as T-shirted staff offer to help you sync with Mi TV smart displays or Mi Cloud remote storage.
The pink/green/yellow/blue/white Mi Pad options — not to be confused with the iPhone 5c’s pink/green/yellow/blue/white varieties — all offer 7.9″ display at 2,048 x 1,536 resolution, giving 326 pixels per inch, which by coincidence exactly matches the iPad Mini 4’s 7.9″ display.
The airy minimalism of the store’s design leaves no doubt as to which California company inspired it: amid a neat wall display of phone covers and chargers, only a giant red “Mi” sign indicates that it actually belongs to an assembled-in-China technology company, Xiaomi, whose CEO and founder, Lei Jun, acknowledges being “greatly influenced” at college by reading about Steve Jobs. Indeed, when Lei announced the Mi 4 phone on stage in July 2014, he declared that Xiaomi had approached the iPhone’s manufacturers to see how they might contribute. If the Apple influence wasn’t clear enough, he then introduced Xiaomi’s new fitness band with a Jobsian “One more thing…”
But this is not a story about a Chinese interloper cloning Apple’s IP and originality (though Jony Ive, Apple’s chief design officer, did use Vanity Fair’s New Establishment Summit in San Francisco three months later to accuse Xiaomi of downright “theft”).
It is, instead, a tale of how Lei built a company priced by its investors at $45 billion (£31bn) — briefly the world’s most valuable tech startup — by creating not a smartphone business, but a new kind of internet-enabled ecosystem: one that turns customers into “fans” who co-design and then evangelise products; that transfers market-demand risk to small hardware startups in which it tactically invests; that slashes costs by minimising inventory and optimising supply chains in fresh ways; and that, by selling high-quality devices at prices so low as to obliterate margins while profiting from services, content and accessories, is innovating at the top of its market.
In five years, Xiaomi has built a base of 160 million phone users, entered markets such as Indonesia and India, and challenged western assumptions of how Chinese tech companies think. Get ready to copy China.
We’re a very different Chinese company: we spare no costs in ensuring the high quality of each and every Mi product,” Lei, who speaks little English, tells WIRED through a translator. “I believe Xiaomi will provide the impetus to raise the quality bar of all China-made products, and will eventually help to lead to a perception that China is no longer about cheap manufacturing and copycats. Over the years, Xiaomi’s mission has evolved into changing the world’s view of Chinese products.
Xiaomi insists it is an internet company, not a smartphone business — although it has had extraordinary success in selling phones. The company’s Twitter archive is a chronicle of growth: on December 18, 2011, it reports selling 100,000 phones in three hours; on April 24, 2012, it sold 150,000 in 15 minutes; and by September 20, 2012, it took just four minutes to sell 300,000.
In 2012, Xiaomi sold 7.2m phones; the next year it sold 18.7m; and in 2014 it sold 61m, becoming China’s biggest phone maker. It sold “over 70m” phones in 2015, vying with Huawei for the lead in China. But it has been expanding internationally in high-population emerging markets under Hugo Barra, formerly head of product management for Android at Google. In April 2014, it bought the Mi.com domain for $3.6m, the record for China, as part of that internationalisation — not least because Mi is easier for foreigners to pronounce than Xiaomi (“sha-oh-me”).
But Lei doesn’t want WIRED readers to see his company as a manufacturer of quality devices: “Think of Xiaomi as a company that is bringing innovation to everyone. We put an emphasis on high-quality products that help to create a connected lifestyle for everyone as we move into a new era of technological innovation. This doesn’t only mean smartphones, tablets, TVs, routers — we invest in startups that form what we call an ecosystem. They make products that are sold on Mi.com, ranging from power banks to wearables to air and water purifiers, so we have hundreds of products that come together to create a lifestyle.”
He also wants to explode the myth that Chinese companies copy from the west. “There is a lot of innovation in China that I would think even the west hasn’t caught up with,” he reflects. “Look at WeChat: people think of it as a messaging app, but it has grown to become a platform that incorporates gaming, payments, internet services. Xiaomi is a smartphone company, but we are also an e-commerce company — Mi.com is the third-largest e-commerce site in China — and an internet services company, which even publishes games. We also incubate startups by investing in them and helping them to make products that we then sell on Mi.com.
–Time it took to sell 100,000 phones during a flash sale in India in October 2014–
“Our motto,” he continues, “is: Less is more. By focusing on making a small number of products, we can be the best at what we do. But when less is more, it means you need other companies to help you do more things. Therefore, we invest in other companies and form an ecosystem to create more products.”
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