Xiaomi Shoots For Middle In Late 4G Arrival
After an embarrassing recent gaffe that saw him ridiculed by fellow smartphone executives, Xiaomi founder Lei Jun was back in the spotlight this week with the launch of his company’s fourth-generation phone aimed at mid-end users. The company managed to get the usual widespread media coverage for the launch of its Mi 4, which it hopes will give it a sales boost necessary to meet an aggressive growth target for this year. But that said, I do sense that media and consumers are starting to tire of the company’s relentless hype and marketing. That could ultimately hurt its growth prospects, especially as China’s mid-range smartphone market becomes flooded with similar products from other domestic manufacturers.
Lei Jun made his gaffe last week when he boasted on his microblog that the casing for the new Mi 4 would be made from a cutting-edge metal with unprecedented lightness, strength and flexibility. But several executives from rival firms quickly noted that the material had already been in the market for several years. One pointed out that his company had been using it in their models for the last 2 years, exposing Lei for his relative ignorance on the subject.
Despite that embarrassment, Lei was comfortably back in the spotlight this week with the widely anticipated launch of his company’s fourth generation model. (English article; Chinese article) After the earlier misstep, Lei tried to shift his focus to the new model’s first-ever metal casing and stylish look, which he said would differentiate it from the flood of models with similar prices and functions from domestic rivals like Huawei, ZTE (HKEx: 763; Shenzhen: 000063) and Coolpad.
The Mi 4 will initially be sold in China for use on the newly launched 4G network of leading carrier China Mobile (HKEx: 941; NYSE: CHL), which is using a homegrown mobile technology not available in most of the rest of the world. Xiaomi will launch models later this year for use on 4G networks run by the nation’s other 2 carriers, China Unicom (HKEx: 762; NYSE: CHU) and China Telecom (HKEx: 728; NYSE: CHA), which are using a technology based on a globally developed standard.
I won’t go into the specifics of the M1 4’s features, since most are commonly available in mid-range smartphones now on the market. Its price tag is also squarely in the middle of the market, set at 1,999 yuan ($325). There was no mention of whether the phones would be available for sale outside of China. But the lack of any mention of such plans at the high-profile news conference indicates they will probably be available only in China at the outset.
Xiaomi launched the new model after selling 26 million smartphones in the first half of the year, surpassing its total of 18.7 million for all of last year. But the company has set an aggressive target of selling 60 million smartphones for all of 2014, which means it will need a big surge from the new Mi 4 to meet that goal. The company also embarked on an overseas expansion earlier this year and now sells its phones in Singapore, Malaysia, the Philippines and India. But I doubt those markets will add much to its top or bottom lines this year.
I’m based in Shanghai and thus am a bit removed from Xiaomi’s home base and high-profile press conferences in Beijing. Still, I do get the sense that media and consumers are starting to lose some interest in this company. Other smartphone executives are increasingly vocal about criticizing Lei and his constant hype, probably at least partly because they sense the growing public fatigue at his company. Xiaomi’s relatively late arrival to 4G could also hurt its prospects, and I do expect the company could have difficulty meeting its 60 million unit sales target for the year.
Bottom line: Xiaomi will post disappointing sales for its new 4G model due to stiff competition and growing consumer fatigue, raising the strong possibility that it could miss its 2014 sales target.
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