XIAOMI INC IN CONSUMER ELECTRONICS (WORLD)

April 2017
SCOPE OF THE REPORT

Scope

This profile encompasses the operations of Xiaomi Inc and how it compares Disclaimer

against its competitors in the following core categories. Much of the information in this
briefing is of a statistical nature and,
while every attempt has been made
to ensure accuracy and reliability,
Euromonitor International cannot be
held responsible for omissions or
Consumer Electronics errors.
Figures in tables and analyses are
calculated from unrounded data and
may not sum. Analyses found in the
briefings may not totally reflect the
Portable companies opinions, reader
Computers Consumer discretion is advised.
Electronics
Xiaomi Inc is one of the fastest
growing smartphone vendors in
China. Along with its fellow
Tablets Mobile Phones Chinese competitors, it is
looking to expand globally. The
company has a growing
presence in a number of Asian
countries and has also been
Activity revamping its product portfolio
Wearables to gain a foothold in other
markets.

Smart
Wearables

Euromonitor International CONSUMER ELECTRONICS: XIAOMI INC PASSPORT 2

STRATEGIC EVALUATION
COMPETITIVE POSITIONING
MARKET ASSESSMENT
CATEGORY OPPORTUNITIES
BRAND STRATEGY
OPERATIONS
RECOMMENDATIONS
STRATEGIC EVALUATION

Key facts

Xiaomi Inc Xiaomi Inc is a private company founded in 2010

by Lei Jun, who remains its CEO.
Headquarters: Beijing, China
The first Xiaomi smartphone was launched in
Regional involvement: Asia Pacific August 2011, with smartphones remaining the
companys core business. It has since evolved
Smartphones, tablets, from being purely a smartphone-centric company
Category involvement:
wearable electronics into weighing scales, air purifiers, rice cookers,
LCD televisions, drones, activity wearables, electric
Net revenue (2015): RMB78 billion bicycles and many more products.
Essentially, the company is looking to create its
Xiaomi Inc Revenue 2011-2015 own Mi ecosystem which extends beyond its
90 mobile devices into other smart home products to
80
create an integrated lifestyle hub for consumers. As
70
of 2016, Xiaomi had invested in 55 companies, of
which 29 were incubated from the ground up by
60
RMB billion

Xiaomi.
50
Xiaomi products run on a heavily skinned version
40
of Android called MIUI. The company has its own
30
ecosystem, operates its own webstore and has its
20 own community and hard-core fans (MiFans).
10
0
2011 2012 2013 2014 2015

Euromonitor International CONSUMER ELECTRONICS: XIAOMI INC PASSPORT 4

STRATEGIC EVALUATION

Financial assessment

The companys meteoric rise to the top in China over a span of three years can be largely attributed to its
unique go to market strategy to sell through the internet retailing channel. This has allowed it to keep costs
low while driving considerable sales volume. However, in 2016, Xiaomi lost some of its steam in the
Chinese market to the more resource-rich Huawei, which overtook the company to claim top spot.
Xiaomis heavy reliance on the online channel is also starting to become an obstacle to expanding its share
particularly in third- and fourth-tier cities in China and in emerging markets like Thailand, India and
Indonesia. Competitors such as Oppo and Vivo have pursued a strategy that is contrary to Xiaomis,
focusing on the offline retail channel. They have been able to better penetrate rural areas where consumers
are still purchasing their smartphones from traditional electronics stores.
As the second largest smartphone player in China in 2016, Xiaomi has not enjoyed the same level of
success as its Chinese counterparts like Huawei and Oppo. Over 90% of its smartphone sales continued to
be driven by the domestic market in 2016. Xiaomi lacks the scale and resources to expand beyond China
as its brand is still relatively unknown in overseas markets.

Xiaomi Inc: Performance 2011-2016

2011 2012 2013 2014 2015 2016

Revenue (RMB billion) 6.0 12.7 31.6 74.3 78.0 NA

Smartphone shipments (million

2.0 7.2 18.7 61.1 70 NA
units)

Euromonitor International CONSUMER ELECTRONICS: XIAOMI INC PASSPORT 5

STRATEGIC EVALUATION

SWOT: Xiaomi Inc

STRENGTHS WEAKNESSES

Smartphones are MIUI services Limited presence beyond Low margins

affordable China
Xiaomi smartphones The company Unlike competitors such The low prices of its
are well-priced for first- constantly engages its as Oppo and Huawei, phones result in slim
time buyers in China Mi fans in order to roll Xiaomi has had limited margins, which will
and emerging markets, out updates and success expanding into make it difficult for the
as well as those looking changes that are in line overseas markets as company to expand into
to upgrade their with what consumers more than 90% of its new markets and
smartphones but who want. This has also total revenue is still categories while
cannot afford to spend helped it to create a driven by China. remaining profitable.
much. tightly integrated
ecosystem.
OPPORTUNITIES THREATS

Moving up the value Wearable electronics Slowdown in Chinese Intensifying competition

chain in smartphones smartphone sales
To improve profitability The Mi Band has been As the pool of first- time As growth in
Xiaomi needs to expand key to allowing Xiaomi buyers in China shrinks, smartphone volume
its range of high-end to dominate the low-cost Xiaomi will have to dig sales slows, a large
smartphones which activity wearables deeper into the number of Chinese
undercut the prices of segment. However, countrys lower-tier companies are offering
leading global flagship Xiaomi needs to shift cities and expand its more competitive model
smartphones like the away from the low-cost distribution to drive line-ups to drive volume
Galaxy S series. model and move sales. sales and attract
upstream. consumer attention.

Euromonitor International CONSUMER ELECTRONICS: XIAOMI INC PASSPORT 6

STRATEGIC EVALUATION
Key strategic objectives and challenges
Shedding its image as a low-
cost smartphone player
Xiaomi was able to disrupt the
Chinese market as it filled a gap
in the low to mid-range segment
with its Mi phones, which were
affordable but offered premium
specifications. Its use of hunger
marketing created much hype
around its products, with this
being instrumental in driving
sales.
However, as more competitors
entered the market with similar
smartphones, it became
increasingly difficult for Xiaomi
to maintain its competitive
advantage in terms of price.
With slower volume sales
growth, the company is under
pressure to improve its
profitability by focusing on
higher-margin products such as
the Mi Mix.
Euromonitor International
Enter new markets and expand
offline distribution
Xiaomis online strategy worked
in the past but its lack of offline
partners is preventing it from
expanding into new market
segments where smartphone
penetration rates are still low.
Going forward, the company is
aiming to increase its offline
contribution in China to 50% of
sales. Xiaomi has set a target of
opening 200 Mi Home stores in
2017 to expand its physical
retail presence.
Beyond China, India is
emerging as a key engine of
growth for the company. As the
Indian government continues to
digitalise the country, India
offers numerous untapped
opportunities for Xiaomi.
CONSUMER ELECTRONICS: XIAOMI INC
Becoming a lifestyle hub
Xiaomi took a leap of faith into
the Internet of Things in 2016
with the announcement of a new
subbrand called the Mi
ecosystem. From smart air
purifiers to smart suitcases,
Xiaomi hopes to create an
ecosystem of products which
are connected and can be
controlled via an Android app.
Essentially, the company is
diversifying its risk by banking
on numerous start-ups.
Diversifying into these new
areas will also allow Xiaomi to
reduce its reliance on
smartphones should some of
these products succeed in
reaching the mainstream
market.
PASSPORT 7
STRATEGIC EVALUATION
COMPETITIVE POSITIONING
MARKET ASSESSMENT
CATEGORY OPPORTUNITIES
BRAND STRATEGY
OPERATIONS
RECOMMENDATIONS
COMPETITIVE POSITIONING

Xiaomi struggles to succeed outside China

The smartphone category in China is

becoming increasingly fragmented,
with multinationals like Samsung Corp
losing ground to low-cost local players
like Huawei, Oppo, Vivo and Xiaomi.
While these started out by focusing on
economy-priced smartphones, they
have been growing their product lines
to include more mid to high-end
smartphones, thus putting further
pressure on the multinationals.
While these Chinese companies have
been able to exert significant pressure
on the multinationals in their domestic
market, their success overseas has
been varied. Xiaomi has struggled the
most in expanding overseas across its
product categories as it has
encountered numerous obstacles such
as a limited patent portfolio and a
limited number of offline partners.

Euromonitor International CONSUMER ELECTRONICS: XIAOMI INC PASSPORT 9

COMPETITIVE POSITIONING

Huawei takes the top spot from Xiaomi in 2016

Huaweis rise to the top was not only driven by its Smartphones: Leading Companies by % Volume
broad distribution network and marketing prowess Share in China
but also its focus on innovation. To strengthen its
Global Brand 2013 2014 2015 2016
brand image, the company is leveraging
Name (GBN) (%) (%) (%) (%)
partnerships with Google (Nexus 6P) and Leica
Camera (a niche optics company known for its Huawei 10 10 15 18
high-end cameras and lenses), which is helping to
build consumer confidence in Huawei as a credible Xiaomi 6 15 15 14
smartphone manufacturer.
Vivo and Oppo are also a key threat to Xiaomi as iPhone 8 8 12 12
they have a fairly similar target audience in China.
All three target youths and consumers in lower-tier Vivo 5 7 9 10
cities who are looking to switch from a feature
phone to a smartphone. Both Vivo and Oppo have Oppo 3 5 8 9
invested heavily in promoting their brands through
numerous television advertisements shown during Samsung 20 13 8 6
popular variety shows, celebrity endorsements and
advertisements on billboards across China. Gionee 3 3 5 6

Euromonitor International CONSUMER ELECTRONICS: XIAOMI INC PASSPORT 10

COMPETITIVE POSITIONING

Dominating the low-cost wearables segment with Mi Band

Xiaomi ventured into activity wearables

with its Mi Band in August 2014. Costing
a mere RMB79 (USD13), it was able to
undercut its competitors by offering
consumers a low-cost wearable that they
could test out without a heavy upfront
investment.
Subsequent wearables - Mi Band 2,
Amazfit and the Mi Bunny watch
(targeted at children) - were priced
slightly higher than the first iteration of the
Mi Band as Xiaomi looks to improve
profitability.
Unlike the market leader, Fitbit, whose
wearables are largely targeted at fitness
enthusiasts, Xiaomis Mi Band primarily
catered for first-time wearables users. As
a company which relies heavily on
volume sales to drive revenue, Xiaomi
will be increasingly challenged as the
pool of first-time buyers shrinks.

Euromonitor International CONSUMER ELECTRONICS: XIAOMI INC PASSPORT 11

COMPETITIVE POSITIONING

No longer just a smartphone player

Xiaomi Mi Ecosystem In 2016, the companys Mi ecosystem division

recorded sales of over RMB15 billion.
The fact that Xiaomi is investing in and relying on
its partners to produce its smart products allow it
to remain lean and put less strain on its
manufacturing arm. With over 55 companies in the
ecosystem and each focused on a single or a
group of products, Xiaomi has the freedom to
focus on driving innovation.
Its most prominent partnership is with Huami Inc,
which designs, engineers and develops the Xiaomi
Mi Band and Amazfit.
Xiaomi is using its smartphones and other Android
phones to operate as a Trojan (or an internet hub)
to drive sales of other smart devices within the
company's portfolio. Moving forward, it is probable
that Xiaomi will become a viable competitor to
Alibaba or JD.com, with its online store acting as a
shopping hub. The fact that Xiaomi has launched
its own payment service (Mi Pay) serves as a
clear indication that the company has its eyes set
Source: Xiaomi Inc
on capturing the online retailing market.

Euromonitor International CONSUMER ELECTRONICS: XIAOMI INC PASSPORT 12

STRATEGIC EVALUATION
COMPETITIVE POSITIONING
MARKET ASSESSMENT
CATEGORY OPPORTUNITIES
BRAND STRATEGY
OPERATIONS
RECOMMENDATIONS
MARKET ASSESSMENT

Agnostic consumers: Cheap is not always better

Agnostic consumers epitomise todays contradictory

shopper. Emboldened by a post-recessionary, hyper-
informed, savvy-shopping zeal, with multiple
opportunities to compare prices at their disposal, they
are less bothered about labels and recognised products,
instead searching for value and novelty. Value for
agnostic consumers does not always mean cheap
prices and new goods and services. Agnostic
consumers are intrigued by innovation around value -
ideas that play with or even challenge their perception
of it. The interest in funding start-ups that bring
inventions to life or backing entrepreneurs is part of this Source: Kickstarter
drive.
Their zest to fund start-ups has helped wearables
companies such as Pebble Technology to not only bring
their products to the mass market but also open new
doors in terms of securing partnerships with retailers to
expand their global reach or even allow companies such
as Misfit, which started on crowdfunding site Indiegogo,
to be eventually acquired by a global fashion brand,
namely Fossil.
Xiaomis concept is fairly similar, appealing to
nationalistic sentiment and the cool factor of its phones
to drive traction among youths.
Source: Indiegogo

Euromonitor International CONSUMER ELECTRONICS: XIAOMI INC PASSPORT 14

MARKET ASSESSMENT

Asia Pacific to account for almost half of total wearables sales

Asia Pacific will be the fastest growing region for Retail Value Sales of Wearable
wearable electronics, with China leading the surge Electronics by Region 2016-2021
in demand. This will be primarily driven by volume 25

growth as average unit price is still below that of

developed markets.
Wearables are finding their way into niche areas in 20
China, such as wearables targeted at children by
leveraging parents concerns about the safety of
their offspring.
15
The growing population of singles in Asia Pacific,

USD billion
particularly in China, is also fuelling some of this
demand for wearables. With reduced financial
burdens, they are more likely to splurge on apparel 10
and accessories such as wearables to look
fashionable and also to act as good conversation
starters.
5
There is a similar shift towards smart wearables in
developed markets such as North America and
Western Europe. Demand for activity wearables,
however, is projected to reach saturation and begin 0
2016 2017 2018 2019 2020 2021
to decline in the US over 2018-2021 as the number
Asia Pacific North America
of first-time users dwindles.
Western Europe Rest of the World

Euromonitor International CONSUMER ELECTRONICS: XIAOMI INC PASSPORT 15

MARKET ASSESSMENT

Mobile phone sales still driven by store-based retailers

Internet retailers are gaining ground among hyper- Mobile Phone Retail Volume Shares by
connected consumers but electronics and Distribution Channel 2011/2016
appliance specialist retailers reigned supreme in
2011
2016, accounting for almost two-thirds of total
volume sales.
2016
Xiaomis key target markets are mostly emerging
countries due to the prominence of their store- 0% 20% 40% 60% 80% 100%
based retailers. Underdeveloped network Electronics and Appliance Specialists
infrastructure, slow mobile internet speeds and Internet Retailing
Mixed Retailers
lower credit card penetration rates mean that store- Hypermarkets
based specialists remain the preferred distribution Others
channel for many.
In Xiaomis largest overseas market, India, over Retail Volume Shares of Electronics and
three-quarters of mobile phone sales continue to Appliance Specialist Retailers 2016
be accounted for by electronics and appliance India
specialist retailers.
Russia
With a large portion of the population still using
feature phones (feature phones accounted for 49% Indonesia
of mobile phone sales in 2016), these consumers Mexico
are more likely to head to a store to test out
smartphones before committing to their next China

upgrade. 0% 20% 40% 60% 80% 100%

Volume share

Euromonitor International CONSUMER ELECTRONICS: XIAOMI INC PASSPORT 16

STRATEGIC EVALUATION
COMPETITIVE POSITIONING
MARKET ASSESSMENT
CATEGORY OPPORTUNITIES
BRAND STRATEGY
OPERATIONS
RECOMMENDATIONS
CATEGORY OPPORTUNITIES

Dramatic decline in BOP consumers offers huge potential

The BOP in China offers substantial opportunities Chinas Bottom of the Pyramid:
thanks to its large size (239 million adults in 2015), 2015-2030
making it the worlds second biggest BOP market. 300 25
Moreover, the greatest potential that the Chinese
BOP has to offer lies in its future dramatic decline,
with BOP consumer purchasing power rising 250
20
significantly.

BOP as a % of adult Population

Through to 2030, China's decile 1 is set to record

Number of adults at the BOP, million

200
the largest increase in discretionary spending 15
capacity compared to all other income groups,
given its strong real income gains. 150

Businesses that can win the loyalty and trust of 10

todays Chinese BOP consumers will be rewarded
100
with a new substantial consumer base. Over the
2015-2030 period the number of adults at the BOP
5
in China is set to shrink by 189 million, which would 50
mean that the equivalent of nearly the entire
population of Brazil will exit poverty and enter the
Chinese middle class. As these consumers exit 0 0
2015 2018 2021 2024 2027 2030
poverty, they will look beyond basic necessities
and will start thinking about purchasing a Number of Adults at the BOP BOP as a % of Adult Population
smartphone or other electronic devices, hence
providing significant untapped opportunities for Note: The BOP is defined as comprising of adults (aged 18 and over) with
Xiaomi. an annual disposable income below USD5,000 (PPP) and a net wealth of
less than USD10,000 (PPP).

Euromonitor International CONSUMER ELECTRONICS: XIAOMI INC PASSPORT 18

CATEGORY OPPORTUNITIES

Growth in China remains reliant on smartphones

With smartphone growth slowing, Xiaomi has looked China: Volume Sales Forecasts in Key
to tablets, wearable electronics and even laptops to Categories 2016-2021
100%
expand its product portfolio.

% of total contribution
However, smartphones remain the biggest volume 80%

driver in China, with sales reaching 460 million in 60%

2021, more than five times the size of wearable
electronics. 40%

Tablet sales have grown considerably since 2011, 20%

particularly thanks to the influx of low-cost white box
0%
tablet makers. However, the growing popularity of 2016 2017 2018 2019 2020 2021
large screen smartphones since 2014 has weakened Laptops Wearables Smartphones
demand for standalone tablets as these smartphones
are able to fulfil both users entertainment and calling China: Value Sales Forecasts in Key
needs. Categories 2016-2021
1,000
Wearables have the greatest potential to be the next
800
big thing after smartphones in China. The growing
middle class and a large proportion of households RMB billion 600
with a single child in China mean that there are 400
opportunities for niches to emerge, such as childrens
200
wearables and fashionable premium wearables.
Xiaomi needs to adopt a targeted approach when 0
2016 2017 2018 2019 2020 2021
positioning its Mi Bunny watch and Amazfit.
Laptops Wearables Smartphones

Euromonitor International CONSUMER ELECTRONICS: XIAOMI INC PASSPORT 19

CATEGORY OPPORTUNITIES

Emerging nations are high-growth markets for smartphones

Some 43% of total mobile phone sales in the Middle Retail Volume Growth of Smartphones
East and Africa in 2016 continued to derive from by Region 2016-2021
feature phones, thus providing immense untapped Middle East and Africa
opportunities when this group of consumers Eastern Europe
upgrades to a smartphone. Asia Pacific
In Eastern Europe, real GDP in Russia is projected Latin America
to return to growth in 2017. Sales of smartphones Western Europe
will see a quicker pace of recovery compared to North America
other electronic products as they are the primary Australasia

computing device for many and are relatively less -4% -2% 0% 2% 4% 6% 8% 10% 12%
costly. However, this increase in demand will be CAGR 2016-2021

driven by low-cost options as unit prices fall.

The number of smartphone users in India is still Retail Volume Sales of Smartphones as
significantly lower when compared with other Share of Mobile Phones 2016/2021
emerging markets. The impending entry of mobile 100% 20%

Share of mobile phones

operators such as Reliance Jio in providing

CAGR 2016-2021
80%
15%
affordable mobile data subscription plans will inject 60%
greater competition into the market and lower the 10%
40%
total cost of smartphone ownership, thus driving
5%
demand. 20%

Indonesia and the Philippines are also key in driving 0% 0%

India Philippines Russia Indonesia
South
this shift towards smartphones, helped by the efforts Africa
of local manufacturers to launch affordable 2016 2021 Smartphones CAGR 2016-2021
smartphones with attractive specifications.
Euromonitor International CONSUMER ELECTRONICS: XIAOMI INC PASSPORT 20
CATEGORY OPPORTUNITIES

Untapped opportunities in Africa

Smartphone volume sales growth has Proportion of Feature Phones in Total Mobile
started to slow significantly, and will Phone Volume Sales 2016
continue to do so over 2016-2021. This
Zambia
is primarily due to a slowdown in
Gabon
demand from large emerging markets Botswana
like China, where smartphone adoption Angola
rates are nearing a peak. Congo-Brazzaville
However, smartphones are still too Senegal
expensive and impractical for much of Central African Republic

the population in Africa and parts of Syria

South Sudan
Asia. In countries like Zambia, Morocco
Burkina Faso
and Cameroon, vast numbers of people
Guinea-Bissau
are expected to continue purchasing
Madagascar
feature phones through to 2018. The Somalia
switchover in these markets will be far Sierra Leone
more protracted than in markets like Cameroon
China due to the comparatively poorer Ethiopia
consumer base and slower economic Kenya
growth. Sudan

These markets are expected to exhibit Nigeria

Iran
steadily rising demand for low-cost
smartphones beyond 2021. 0 15 30 45 60 75 90
% share

Euromonitor International CONSUMER ELECTRONICS: XIAOMI INC PASSPORT 21

STRATEGIC EVALUATION
COMPETITIVE POSITIONING
MARKET ASSESSMENT
CATEGORY OPPORTUNITIES
BRAND STRATEGY
OPERATIONS
RECOMMENDATIONS
BRAND STRATEGY

Xiaomi: Key product lines

MIUI: This Android-based firmware powers all tablets and smartphones sold by Xiaomi. Google Play and
Google services are not available on devices intended for the domestic market but have been made
available and pre-installed on those destined for markets outside China.
MiCloud and MiTalk: MiCloud is one of the integral parts of MIUI and one of the companys main
differentiating factors. The service is primarily intended to allow users to back up the data on their
smartphones on the companys servers. Users can also use the service to track and lock their phones as
well as share the stored content with other devices. MiTalk is the companys messaging app and is
available for Android and iOS devices.
Mi: This is the umbrella brand for the companys flagship line of smartphones, covering lower-end RedMi
phones to the more premium Mi 5, Mi Mix and Mi Note to target different consumer groups.
MiPad: Released in 2014, the 7.9 inch tablet costs RMB1,499 and was initially available only in China
before being released in overseas markets like Singapore. In 2015, Xiaomi launched an updated model, the
MiPad 2, which has a more premium metallic casing compared to the plastic casing of its first iteration.
Mi Notebook Air: Xiaomi launched its first notebook in August 2016, with this having a strong resemblance
to Apples MacBook Air in its industrial design but at a much more affordable price of RMB4,999 for the
13.3 inch notebook and RMB3,499 for the 12.5 inch version.
MiBand: The fitness tracker is one of the cheapest in the market, retailing at around USD13. Following the
success of MiBand, Xiaomi subsequently launched an updated version which comes with an OLED display
and Amazfit, catering for consumers who want their wearables to complement their fashion style.
Mi Ecosystem: Essentially, this is the incubator for over 50 companies which Xiaomi has invested in with
regard to the Internet of Things. Through these products, Xiaomi hopes to eventually become a lifestyle hub
for its consumers.

Euromonitor International CONSUMER ELECTRONICS: XIAOMI INC PASSPORT 23

BRAND STRATEGY

Overhauling its distribution strategy

Xiaomi, like other smaller smartphone vendors, lacks the advertising and marketing budgets of Samsung
and Apple. When Xiaomi first started out, in order to create excitement surrounding its brand in a crowded
marketplace, with limited resources and thin margins, the company opted to adopt a hunger marketing
strategy. To create a sort of exclusivity, flash sales are the only way to get a Xiaomi smartphone without
going through grey market resellers. By limiting the supply of its smartphones, it created a sense of
urgency, with this also helping to limit its inventory maintenance costs.
The company began to shift away from solely relying on the online channel to distribute its products in 2015
and 2016. As a large portion of mobile phone sales, particularly in emerging markets like China and India,
continue to be driven by the offline channel, it was imperative that Xiaomi reassess its distribution strategy
in order to continue to grow its share.
With a target of 50% of total smartphone sales through retailers in China and around 25% of total sales in
India, the company has taken steps to secure partnerships with numerous key electronics retailers.
Xiaomis offline partners in China: Xiaomis offline partners in India:

Euromonitor International CONSUMER ELECTRONICS: XIAOMI INC PASSPORT 24

STRATEGIC EVALUATION
COMPETITIVE POSITIONING
MARKET ASSESSMENT
CATEGORY OPPORTUNITIES
BRAND STRATEGY
OPERATIONS
RECOMMENDATIONS
OPERATIONS

Sourcing highlights

Xiaomis operations are centred on cost control in order to maintain profitability and low prices. The
company does not have its own production facilities, instead relying on partnerships with contract
manufacturers to produce its devices.
The company has a production line in Brazil in partnership with Foxconns local plant but ceased local
production in 2016 due to changes in production regulations and heavy taxation on online sales of its
smartphones, forcing it to significantly downsize its operations.
Xiaomi has shifted its attention to India. The governments Made in India initiative to encourage foreign
investment led to it setting up two plants in the country which manufacture Xiaomi phones. These are
owned and operated by Foxconn but only manufacture phones for Xiaomi.
Xiaomis main suppliers are Hon Hai Precision Industry Co Ltd (Foxconn) and Inventec Corp, which handle
Xiaomis manufacturing and assembly, while Qualcomm Inc supplies a large proportion of the processors
used in the companys smartphones, while also being one of the founding investors in Xiaomi.

Euromonitor International CONSUMER ELECTRONICS: XIAOMI INC PASSPORT 26

STRATEGIC EVALUATION
COMPETITIVE POSITIONING
MARKET ASSESSMENT
CATEGORY OPPORTUNITIES
BRAND STRATEGY
OPERATIONS
RECOMMENDATIONS
RECOMMENDATIONS
Expand beyond smartphones and China
Smartphones to drive volume
sales
Smartphones need to remain
the focus for the company as
this category is expected to be
the main volume and value
sales driver in consumer
electronics over the forecast
period.
However, as the number of first-
time smartphone buyers globally
shrinks, the company needs to
continue to diversify its product
line-up to include more premium
and mid-range units.
Economy-priced phones remain
key to sustaining long-term
volume sales, with the
companys lower prices
constituting a more significant
competitive advantage than
higher-priced ranges.
Euromonitor International
Reinventing itself as a
shopping hub
Xiaomis strategy with its Mi
ecosystem to identify and invest
in start-ups which manufacture
connected products could be a
way for the company to improve
its profitability.
The fact that Xiaomi assumes
the role of an investor rather than
a manufacturer of products also
gives it more flexibility in
withdrawing its commitment
without a heavy upfront cost.
By creating an internet hub with
its suite of connected products,
Xiaomi could potentially leverage
these connected devices to
create its own shopping hub
through Mi Pay and partnerships
with grocery or apparel retailers
to drive sales through its online
store.
CONSUMER ELECTRONICS: XIAOMI INC
Geographic strategy
Xiaomi needs to remain
competitive in the economy
segment. Crucial to this is
success in India and Southeast
Asia in the short term, and
gaining ground in Africa over the
longer term.
Countries like India,
Bangladesh, Nepal and Pakistan
are still dominated by feature
phones but are expected to
continue to migrate to
smartphones over the forecast
period and beyond.
The company needs to establish
a foothold in these markets to
keep smaller regional and local
vendors from becoming more
significant threats.
PASSPORT 28
REPORT DEFINITIONS

Data parameters and definitions

The forecast period comprises the years 2016 through to 2021, inclusive.
All forecast retail value figures cited in this report are expressed in constant terms unless otherwise stated;
inflationary effects are discounted. All historical figures, country-specific, regional and global, through to
2016 are also expressed in constant value terms, with any inflationary effects discounted.
All US dollar data cited in this report, historical and forecast, at national, regional and global level, are
shown at fixed 2016 exchange rates.
Laptops - Personal computers (PCs) meant for mobile use and incorporating an external power source and
a rechargeable battery pack.
Tablets - Portable computers designed primarily for touchscreen interface, including those with an optional
detachable keyboard. Products with a non-removable keyboard are excluded.
Smartphones - Any device capable of voice communication over a cellular network. A smartphone must
have an identifiable operating system (eg Android, BlackBerry OS, iOS, Symbian, Windows), allow the
installation of software applications (apps) and have a screen size of <7.
Activity Wearables - Wearable electronic devices designed to collect data and relay it to another device for
processing. It cannot be used without another device such as a smartphone or computer.

Euromonitor International CONSUMER ELECTRONICS: XIAOMI INC PASSPORT 29

FOR FURTHER INSIGHT PLEASE CONTACT
Karissa Chua
Analyst - Consumer Electronics
karissa.chua@euromonitor.com

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