CELLPHONES: Xiaomi Goes Upscale With New Phablet
Bottom line: Xiaomi’s new more upscale Mi Note phablet should get a strong reception and sell well, drawing on the company’s trendy name and growing base of loyal buyers.
Smartphone sensation Xiaomi doesn’t seem content to only follow its role model Apple (Nasdaq: AAPL) anymore, and is also taking a page from stumbling sector leader Samsung (Seoul: 005930) with its latest model as it seeks a long-term direction for its products. Of course I’m being just a little facetious with my comparison to Apple, since the only thing Xiaomi shares with the US company is a cool and trendy image. Apple is firmly placed at the top end of the smartphone market, whereas Xiaomi began its life in the mid-range and has steadily moved downmarket since then.
But the Chinese high-flyer wants to try and change that trend with the roll-out of its latest model, the Xiaomi Note, which is known as a phablet because it’s in between the size of more traditional smartphones and larger tablet PCs. (English article) The phablet part of the market was discovered early by Samsung, helping the Korean company to become the world’s largest smartphone brand. But Apple moved into the space last year with its iPhone 6, and now Xiaomi is following in the footsteps of the global leaders.
This shift for Xiaomi isn’t a complete surprise, as market trends were moving in that direction and a popular tech blogger also hinted at the move last week. (previous post) The tack certainly seems to cement Xiaomi’s reputation as a tech follower, even though the company would clearly like people to think of it as a leader. The new product not only follows Samsung and Apple into the space, but even borrows the popular “note” name used by Samsung’s similar Galaxy phablets.
The new Xiaomi Note, which was unveiled at a ceremony in Beijing, includes a 5.7-inch screen that’s slightly bigger and body that’s thinner than Apple’s iPhone phablet launched last year. Apple also broke with tradition in its iPhone 6 launch by rolling out 2 different sized models, a smaller one similar to past iPhones and the larger phablet.
Xiaomi actually already makes a phablet smartphone, the Redmi Note, but that model is positioned squarely at the low end of the market. This new model will cost about 2,300 yuan ($370) when it goes on sale at the end of this month, which would make it one of Xiaomi’s most expensive models to date but still half the price of comparable phablets from Apple or Samsung.
The strategy of going upscale looks like a good one, as China’s smartphone market is extremely competitive at the lower end of the market where numerous names like Huawei, ZTE (HKEx: 763; Shenzhen: 000063), Coolpad (HKEx: 2369) and many others are vying for share. Unlike many of its rivals, Xiaomi actually has a rather strong reputation and is starting to develop a loyal customer base that might consider paying a premium for a higher-end model from the brand.
This kind of a march up the brand value chain is a tricky one, but it’s also one that a number of other Asian names have made over the last few decades. Japanese firms were one of the first groups to make the transition, starting out as makers of cheap goods and later transforming to premier quality names like Sony (Tokyo: 6753) and Panasonic. Korea’s Samsung was also once a low-end brand that has now become a premium name.
I like to poke fun at Xiaomi because it tries so hard to imitate big names like Apple, even as it tries to portray itself as a trend-setter and innovator. But frankly speaking, this kind of strategy is probably the best one for such a new company, which has far less experience and resources to truly compete with the big names in terms of innovation. Accordingly, I would give a thumbs up to its newest model, and expect the Mi Note should sell well.
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