Is it Too Soon for Xiaomi to Go Global?

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XIAOMI MI2S (Photo credit:

Hutong West
Wiping the floor
2117 hrs.

I had a long talk with Michael Kan at IDG recently about China mobile phone maker Xiaomi and its high-profile hire of Google refugee Hugo Barra to head up the company’s international expansion. The core of our discussion was around whether it would make a difference. Michael was circumspect about his opinion, but I wasn’t: Hugo is a great hire, but he will not easily solve the challenges to Xiaomi’s global ambitions.

Xiaomi has a strong market in China, built on powerful devices that sell at very modest prices, on a slightly patriotic appeal (buy Chinese!), and on some deft PR by founder and CEO Lei Jun. Where the company differs from other Chinese manufacturers of inexpensive Android phones is that it is attempting to build an ecosystem of its own that is meant lock in users and draw revenue on content and services in the same way that Apple has done.

Now that Barra is aboard, the bet in some quarters is that a major international push is in the offing. If it is, I wish Lei, Barra, & Co. best of luck. They are going to need it, because the minute they step outside of their China cocoon, things are going to get different for them very quickly. The three biggest challenges I see aren’t even marketing related. They boil down to distribution, strategy, and resources.

They Can’t Buy What They Don’t See

China is a retail-based mobile device market. This means that any mobile phone manufacturer can get counter space in a retail store and sell an unlocked phone to the public. The only challenge is to get people’s attention so they look for you. Lei has figured that out, which is what draws people into the stores.

Markets like the US, though, are carrier-based. This means that in order to be sold to the public, you must first win over one or more of the mobile network operators, who will then sell your device (locked) for their network both directly and through authorized retailers. As a result, there is a relatively modest number of devices available in the US, and breaking in is tough. Most carriers start out with new manufacturers (think LG and ZTE) in an arrangement where the manufacturer’s brand never shows up on the device: it is branded by the carrier. Over several years, that can change, but it will take time, and there are unlikely to be shortcuts for Xiaomi.

Cheap May Not Be Enough

Xiaomi is no stranger to competition: China’s mobile market probably has 70 handset manufacturers offering 800 devices on sale at any given time. In the US, however, it will face competitors who have the home-court advantage that Xiaomi is used to having. Apple, Samsung, HTC, LG, Google, Microsoft, Huawei, and ZTE bring more cash, technical muscle, marketing prowess, and corporate attention to the global markets than Xiaomi can afford.

Certainly there have been David-Goliath stories before: every company in the US mobile phone business with the exception of Motorola started out as an underdog. But against a particularly brutal array of competition – including Chinese rivals who can match and beat any cost advantage Xiaomi can bring to the table – Xiaomi is going to have to figure out what it can offer to non-Chinese users that its well-funded, technological-powerhouse rivals cannot. Will it be innovative, and how? Can it find a neglected niche? Will it grab onto a powerful partner, and if so, whom?

Or will the company try to duplicate its software and services ecosystem overseas?

To his credit, I get the feeling Lei understands that “cheap and cheerful” is not an option.

Going Too Many Places At Once?  

China’s entrepreneurs face great temptation. Once they are successful in one business, many of them begin to think they can be successful in other, unrelated lines. There are so many green fields and blue oceans in China that the urge to move into those new areas is almost irresistible. That siren song is too-often fatal. I have watched from the inside of two giant Chinese companies as these sideline businesses sucked capital and attention from the company, allowing more focused rivals (often foreign) to leap ahead.

Xiaomi is showing early signs of entrepreneurial attention-deficit disorder. The company is already in software and services in order to secure profits that it would be hard-pressed to make on its inexpensive devices. Now Lei wants to move into internet-ready televisions, a product line that has become much easier to make but no less difficult to sell to the public, and dozens of local brands already crank them out, undercutting prices. This means that Lei will need to get into a services and content business in order to make profits from any TVs he sells.

Then comes the globalization. Lei has said that he will turn to Barra to run international markets. That would be ideal if it would work. Chances are, though, that it won’t. The fundamental business decisions that will need to be made in order to turn Xiaomi from a Chinese company to a global one are going to draw on the valuable time of Lei and his lieutenants.

All of that distraction will take place at a time where Lei will need to shore up Xiaomi’s position and defend it against the onslaught of competitors keen to rip his market out from under him. The company is number six in China in smartphone sales according to some analysts, but that position is far from secure. One misstep in its core business and it could go very wrong.

Oh, and About that Name…

This is normally the point where I would bring up the fact that non-Chinese outside of China would be able to pronounce “Xiaomi.” The real issue, though, is not getting people to pronounce the name, but getting people to care enough to even try. Consumers around the world have no idea who Xiaomi is, or whether it is a creation of the Ministry of State Security in a plot to listen in on the world’s conversations. Beyond the technical, beyond the strategic, there is the simple issue of getting people to know and care about you. Chinese companies are notoriously bad at this, and as adept as Xiaomi has proven itself in China, it is a long leap to build that faith across the Pacific.

The good news for Xiaomi is that Barra gets all of this. When I saw him at the China 2.0 conference at Stanford earlier this month, he had no illusions. In his offhand remarks you could hear him honing his messages as much for external audiences as internal ones: this is going to be a long slog, and Xiaomi needs to be ready for it.  At the moment, though, it is unclear whether Lei Jun has the stomach or the war chest for a long battle against the established names.

The hard decision that the company will face soon is this: are we better off focusing that effort today on winning in China, engaging in a token overseas effort to seed long-term awareness and eventual trust; or do we go whole hog in both directions, aiming for the top spot in China and a dozen international markets at the same time?

If Lei Jun has is way, watch for Xiaomi to try to score some quick, modest wins overseas to generate buzz. The wise move at that point would be for Lei and Barra to start raising serious money to enable them to take on Samsung, Google, Apple, HTC, and Microsoft.

Either way, this is going to be both fun and educational to watch.


About David Wolf

An adviser to corporations and organizations on strategy, communications, and public affairs, David Wolf has been working and living in Beijing since 1995, and now divides his time between China and California. He also serves as a policy and industry analyst focused on innovative and creative industries, a futurist, and an amateur historian.
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7 Responses to Is it Too Soon for Xiaomi to Go Global?

  1. yangyun0 says:

    Xiaomi has the whole world to itself apart from USA because of copyright problems.

  2. Fascinating post and extremely thoroughly written, thanks. Lei Jun seems like a bit of a joker (but then again, so did Steve Ballmer). The good news is that they’re already going in the right direction. Big names like Samsung are already developing their own ‘versions’ (or forks) or Android, like XiaoMi has. Speaking of the name, they might want to pull a KFC, IBM or ZTE, and just go with XM or CXM (ChinaXiaoMi) or something. That’s assuming they want to appeal to non-Chinese.

    With so many wealthy overseas Chinese all over North America and Europe, they may not have to. Look at Samsung. That’s a Korean brand, through and through. Samsung’s advertising may seem insane to a Western audience, but to Koreans it sings. Don’t try to be everything to everyone.

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  4. Matt Schrader says:

    Hi Michael, thanks for this post. Very thorough.

    Quick question about the foregoing analysis (I’ve not studied Xiaomi extensively, just something that popped to mind while reading your post, so please forgive if the question seems ill-informed): In much of your post, esp in points 1 and 2, it seems like you’re evaluating Xiaomi’s opportunities for international expansion by explaining how difficult it will be for them to crack the US market.

    But there’s a whole big world outside the US, with plenty of people in it who buy smartphones. What do you make of Xiaomi’s chances in other parts of the world (i.e. India, Russia, Europe, Japan, etc.)?

    • David Wolf says:

      Matt, fair question, and thanks for asking.

      A couple of points in response.

      First, I emphasize the US market as it remains the single largest, highest profile, and most profitable market for mobile devices outside of China. It is thus a tempting target, as evinced by efforts on the part of Lenovo, ZTE, and Huawei to enter the US smartphone fray.

      Second, the US market is also exemplary in the degree to which it is challenging for an outside brand to succeed here regardless of its market power elsewhere. Despite its success elsewhere, for example, Nokia never succeeded in the US.

      Nonetheless, other markets offer similar if not identical arrays of challenge that Xiaomi will have to address one-by-one. They won’t get into Brazil unless they manufacture there. India will confound them because of a nightmarishly fragmented distribution system and a market that remains tiny for a nation of that size. Japanese carriers make US network operators look downright laissez-faire. And Europe, whatever its customs regime, remains a cluster of markets just dissimilar enough to keep costs discouragingly high.

      I could go on, but you get the idea. Even with an incredibly supportive CEO who can write checks all day, Barra has a steep climb ahead. At the same time, though, Xiaomi’s battle at home is far from won. I’m trying to believe, trying not to think in terms of sentences that include the words “bite,” “more,” and “chew,” but Xiaomi have set themselves a high bar indeed.



      • I agree with the statement that “Xiaomi won’t get into Brazil unless they manufacture there”, however note that 1. Hugo Barra is Brazilian; 2. Foxconn (which manufactures Xiaomi) is investing US$3bi in Brazil [1]. I do believe there is a gap in the market in between the ultra-expensive iPhones and Samsungs and the ultra-cheap shanzhai knock-offs.

        I believe Hugo Barra’s hiring shows that Lei Jun “gets it”. Barra was raised and educated in a developing country, but has professional experience and a high degree (MIT) from the US and although he does not have China experience (I assume), he is also not the typical culturally-clueless laowai one may expect.


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