SMARTPHONES: Xiaomi Overheats In India, Eyes Brazil
Bottom line: Xiaomi’s latest headaches in India due to a technical glitch are just one of many growing pains it will experience more frequently due to its rapid expansion, as it targets developing markets under its push to become a global brand.
Xiaomi is fast becoming the unofficial smartphone of the BRICS, with word that it’s getting ready to start producing its signature phones in India as it also gets set to launch in Brazil next month. The company is also likely to enter Russia later this year, leaving South Africa as the only BRICS country missing from its global footprint by the end of 2015.
At the same time, Xiaomi’s ride into India has been quick but also bumpy, starting with a patent dispute last year and now including a problem that has seen its latest model in the market, the Mi 4i, experience overheating problems. Those kinds of problems will only be magnified in more developed western markets, which is why Xiaomi says it won’t be selling its smartphones in North America or Europe anytime soon.
Xiaomi is a trailblazer in many ways, as it’s the first truly Chinese consumer brand that is trying to globalize through an organic growth strategy. PC giant Lenovo (HKEx: 992) is arguably the first Chinese consumer brand to attain truly global status, though it made that leap through acquisitions starting with its ground-breaking purchase of IBM’s (NYSE: IBM) PC business a decade ago.
Xiaomi has chosen a more organic growth strategy for its globalization, and the latest reports show its road map will pass squarely through the BRICS countries that are large and wealthy enough to make major investments there worthwhile. Xiaomi entered India last summer, and sold more than 1 million of its smartphones there in the second half of the year. But then it hit its first roadblock, in the form of a patent lawsuit by global telecoms giant Ericsson (Stockholm: ERICb).
Now media are reporting that Xiaomi has hit another glitch in India with its recently launched Mi 4i, a $200 phone that made its global debut in India about a month ago. That glitch has seen the phones overheat when users play high-powered games or use other high-powered apps, Xiaomi says. (English article; Chinese article) Other reports are saying Xiaomi’s Mi 4 model experiences similar problems when users make ordinary phone calls, prompting some to use earphones to avoid putting the hot phones next to their ears.
Xiaomi has responded by saying it is developing a fix for a problem. This kind of issue certainly isn’t that unusual for a new model. But it won’t do much to help Xiaomi’s “cool” image that is starting to unravel as it abandons its previous business model of selling all of its products to trendy online crowds for a more mainstream model that also sells through traditional retail stores.
Meantime, the company is preparing to produce its phones locally not only in India, but also in Brazil, where it is planning to launch next month, according to one of my former students, who reported the news in the subscription-based Brightwire service. Launches in Russia and Vietnam are also planned in the near future, though the company hasn’t given any specific dates yet.
The local production plan looks smart, as it should help to avoid costly import tariffs and could also speed the movement of new products to market. Xiaomi has chosen a good partner in Brazil in Taiwanese contract manufacturer Foxconn (HKEx: 2038), which has also produced iPhones for Apple (Nasdaq: AAPL). But such a localized production strategy will also inevitably bring occasional new problems, at least initially, due to Xiaomi’s lack of experience.
Finally the Brightwire report contains the interesting word that Xiaomi won’t be entering the US anytime soon, despite my earlier speculation that it might make such a move after its recent beta testing of online accessory stores in the US and Europe. (previous post) Xiaomi is worried about patent litigation that it would almost certainly face as soon as it tried to enter any of those markets. Such concerns are probably well-founded, and its decision to focus first on the BRICS and other developing markets looks like a prudent strategy as it tries to build its global credentials before entering those western markets.
Related posts:
