Two years after its high-quality, budget smartphone won over millions of
Chinese fans, domestic tech firm Xiaomi Tech wants to make more money
from online shopping and games than it does from selling its handsets.
is better known globally as China's answer to Apple Inc, an image that
billionaire Lei Jun has fostered since he founded the company in 2011 by
dressing in the black tops, jeans and sneakers favoured by the late
Lei has since expanded his wardrobe options and Xiaomi
sold more smartphones than Apple in the second quarter in China, the
world's biggest smartphone market, according to the latest data from IT
industry consultancy Canalys.
Xiaomi's low prices, however, mean
its profit margins are thin and that's why Lei now wants to expand into
China's mobile Internet business, estimated to be worth around $30
billion by 2015 from roughly $9 billion in 2012.
"Xiaomi looks a
bit like Apple but is really more like Amazon with some elements of
Google," Lei said in an interview in Beijing, dressed in a blue shirt,
blue jeans and brown shoes.
"The mobile phone is only the
carrier," Lei said. "Microsoft used to sell Windows in a box with a CD
in it. Does that make Microsoft a paper box company?"
popularity of Xiaomi's cheap yet sleek handsets is indisputable: its
flagship smartphone, the Mi 2S, was the most popular phone inChina
during the first half of the year, according to local benchmarking
Xiaomi's latest smartphone, the Hongmi, sells for
$130, much lower than the $770 price tag of the iPhone 5 or the $470 for
the latest Galaxy model by Samsung Electronics Co Ltd, the market
leader in China.
In the second quarter of this year, Xiaomi was
ranked sixth by market share, one notch above Apple, but this lead is
likely to be short-lived as the U.S. firm is expected to unveil its
redesigned iPhone in September and may also release a cheaper emerging
The 43 year-old chief
executive said it was high time for the Apple comparisons to end and the
rivalry with local tech giants Alibaba GroupHolding, Baidu Inc and
Tencent Holdings Ltd to start.
Xiaomi currently makes around 20
million yuan a month in revenue from its mobile Internet platform, which
includes a game centre, an online marketplace and a social messaging
app that competes with Tencent's popular WeChat.
In the first half, that figure was equivalent to less than 1 percent of monthly revenue, company data shows.
estimated mobile Internet revenue may rise to as much as 150 million
yuan a month by the end of next year as Xiaomi develops what he called
its software ecosystem.
He declined to give specific details, but said Xiaomi had the hardware it needed to expand into online services.
"Xiaomi selling mobile phones is like Amazon selling Kindles," he added.
experts warn Lei's big ambitions may be dwarfed by the size of his
competitors and their already established mobile Internet offerings.
Chinese consumers are also accustomed to free downloads and won't pay
for software, making it difficult for companies to make money that way,
said Michael Clendenin of Shanghai-based IT consultancy RedTech
"Apple has a great ecosystem, but that's created to keep people on their hardware. Not the other way round," he said.
has been valued at up to $10 billion, while Tencent, China's largest
Internet company by revenue, has a market capitalisation of $88.6
Baidu, the owner of the country's biggest search engine,
is worth $49.5 billion while the impending IPO of Alibaba, the country's
leading e-commerce company, may value the firm at more than $100
Tencent's social messaging app WeChat is used by over
half of all Chinese smartphone users and Alibaba's Taobao is one of the
world's top 20 most visited websites. Sina Corp's Weibo is the dominant
microblogging platform, making it hard for Xiaomi to compete in all
these segments, Clendenin said.
"If Lei believes that creating a
great phone and then trying to use it as a Trojan horse to dethrone
Tencent and similar companies, I think he's got quite a battle ahead of
him," he added.
© Thomson Reuters 2013