Xiaomi - The Apple of China?

Here's Lei Jun (on the left). Notice something familiar about him? The blue jeans; dark top and introducing a shiny new smartphone to present to the world's media. Uncanny.

Lei Jun is the founder and CEo of a firm called Xiaomi which the Chinese media have nicknamed the “Apple of the East."

Lei Jun himself is also increasingly being called the "Steve Jobs of China" - and not just for his dress sense and presentational style!

Lei is fast becoming one of China's most celebrated and famous entrepreneurs. He grew up near Wuhan, an industrial city in central China, and studied computer science at university. It was during college, in 1987, he says, that he read a book about Mr. Jobs, and decided to emulate him.

“I was greatly influenced by that book, and I wanted to establish a company that was first class,” Mr. Lei said. “So I made a plan to get through college fast.”

Xiaomi is selling smartphones. Lots of them. Xiaomi sold $2 billion worth of handsets in China in 2012 and is fast emerging as a force in China, the world’s largest mobile phone market, with revenue forecast to double in 2013.

Founded by a group of Chinese engineers in 2009, Xiaomi sold seven million mobile phones in 2012 by using designs that, according to the New York Times "mimic the look and feel of the iPhone and using marketing that seems right out of Apple’s playbook."

Xiaomi is now the sixth biggest smartphone vendor in China, ranking above Apple. Chinese consumers bought 88.1 million smartphones (33 percent of all worldwide shipments) in the three months to June 2013. Xiaomi owns about 5 percent of this market with Apple just behind on 4 percent.

Part of the reason why Xiaomi has been so successful so quickly is that Google's Android operating system is far and away the dominant force in China. Samsung is the leader with 17.6 percent market share, followed by Lenovo, Yulong, ZTE, Huawei and then Xiaomi.

Xiaomi released its first smartphone in August 2011. Xiaomi is known for listening closely to customer feedback and soliciting critique directly from users. Its phones are “co-developed” and the products are sold directly through the website — it has no retail stores and does not work with third-party distributors.

In August 2013 Xiaomi announced that it had completed a fourth round of equity funding to support its continued growth. The share price paid by new investors valued Xiaomi at around $10bn. To put that into perspective, Blackberry is due to be sold for around $4bn. How quickly do the relative fortunes of smartphone makers change!

Until recently China was mainly associated with assembling mobile phones rather than designing and marketing them. The 1.3 million people employed by contract manufacturing firm Foxconn (who assemble phones for Apple, Nokia, Sony and others) is perhaps the best example of that role. However,increasing it is Chinese firms that are looking to move up the value chain - to go beyond the dead end of assembling devices for other companies.

Firms like Xiaomi and Huawei are challening the pre-conception that Chinese firms are only able to assemble or imitate.

Xiaomi claims that its products are targeted at young, college-educated people who want a smartphone but cannot quite afford one. By selling direct (no use of wholesalers, distributors or retailers). Xiaomi says it can sell smartphones for just half the price of the iPhone or Samsung Galaxy phones.

Xiaomi's first product - the Mi-1, sold out in two days. The Mi-2 was released in August 2012 and sold out so quickly that some analysts claimed Xiaomi was creating artificial shortages to generate buzz through “scarcity marketing.”

The latest product - the Mi-3 was launched in Beijing on 5 September 2013.

The Economist Magazine wrote this about the launch:

"It feels more like a rock concert than a press conference as the casually dressed chief executive takes to a darkened stage to unveil his firm’s sleek new smartphone to an adoring crowd. Yet this was not the launch of the new iPhone by Apple on September 10th, but of the Mi-3 handset by Xiaomi, a Chinese firm in Beijing on September 5th. With its emphasis on snazzy design, glitzy launches and the cult-like fervour it inspires in its users, no wonder Xiaomi is often compared to its giant American rival, both by admirers and by critics who call it a copycat."

Could Xiaomi replicate its success outside of China and begin to penetrate other markets, including the smartphone markets in developed economies? Might it try to replicate its success in smartphones by moving into other consumer electronic product markets such as tablets and televisions?

According to this BBC interview, the company, which recently hired Hugo Barra - one of Google's top executives, has now set its sights on global growth. However, it might be a year or two before those ambitions are acted upon:

Further Research on Xiaomi