CELLPHONES: Xioami Boosts India Ties With Launch, Investment
Bottom line: Xiaomi’s release of a new model and addition of a high-profile investor in India reflect the market’s key role in its global expansion this year, with a likely target of 4 million or more unit sales.
Smartphone sensation Xiaomi is working hard to repair its position in India, following a setback late last year that saw some of its higher end products locked out of the market over a patent dispute. Now the company is making a big new push at the lower end of the market, choosing India for its first product launch outside of China. At the same time, the company announced it has sold a stake in itself to one of India’s best known tech tycoons, a patriarch at the renowned Tata Group conglomerate.
Both of these news bits come from an event late last week in India, and underscore the growing importance that Xiaomi is placing on the market this year to keep its meteoric growth alive. Xiaomi is banking heavily on global markets to fuel its growth story, now that it is already king of the smartphone hill in its home China market.
Xiaomi has kept a relatively low profile since its last mega fund raising at the start of this year that gave it a hefty valuation of $45 billion just 5 years after its founding. The company’s charismatic and talkative founder Lei Jun was back in the spotlight for the new India product launch, alongside former Google (Nasdaq: GOOG) executive Hugo Barra who has become the public face of Xiaomi’s global expansion. (English article; Chinese article) Also at the event was Ratan Tata, chairman emeritus of the holding company for the Tata conglomerate whose assets include Tata Teleservices (Mumbai: TTLS), one of India’s major wireless carriers.
The VIPs came together for Xiaomi’s launch of Mi 4i, a model that supports 6 Indian languages and was developed specifically for the market. The model is at the lower-end of the market, carrying a price tag of 12,999 rupees, or about $200. That’s even cheaper than the original price of Xiaomi’s previous main Indian model, the Redmi 2. But a quick look online shows the Redmi 2 is now selling for just 6,999 rupees, or just over $100.
These models are definitely well suited to price sensitive markets like India, though they won’t help to burnish Xiaomi’s reputation as a maker of upscale smartphones like those from its role model, Apple (Nasdaq: AAPL). Xiaomi’s focus on low-end smartphones in India may not be simply by choice, since some of its higher-end models may use technology that’s at the heart of its patent dispute with Ericsson (Stockholm: ERICb). That dispute erupted late last year, and saw a court ban Xiaomi from selling some of its higher end models in India until the matter was resolved. (previous post)
Xiaomi entered India in the second half of last year, and sold more than 1 million phones there in 2014. It wants to keep selling at that rate and continue its young tradition of triple-digit growth, meaning it is probably aiming to sell 4 million phones there or more this year. In a move to reach that target, the company signed distribution deals with a number of new retail partners in April, ending its previous exclusive arrangement with local online retailer Flipkart. (previous post)
The new investment by Ratan Tata should also help to give Xiaomi a boost in the market, since it means that his group’s Tata Teleservices could also soon become a major new customer for the phones. There’s no word in the latest reports on the size of Tata’s investment, nor any new valuation from the deal. I doubt the stake is very large and is probably more a strategic move by Xiaomi, which possibly even sold the stake at a discount to the earlier $45 billion valuation. All these moves seem to almost guarantee Xiaomi will see strong growth in India this year, though some of that could come at the expense of the exclusive, more upscale image the company has been trying to create.
Related posts:
