Xiaomi Corporation – a Chinese electronics giant often dubbed the “Apple of China”, with specialisation in smartphones and smart devices – is now planning to focus on non-smartphone segments for growth. Last week the Beijing based company announced a planned investment of more than US$7 Billion in the areas of 5G, Artificial Intelligence (AI), and Artificial Internet of Things (AIoT). The announcement builds on last year’s pledge to invest US$1.5 billion over five years in an “All in AIoT” (AI+IoT) strategy.
Setting the scene for AI, IoT and 5G
Facing stiff competition from the likes of Huawei (with 42% of China’s smartphone market share in Q3 2019), Xiaomi is aiming to sustain business growth in the face of a challenging smartphone market. Xiaomi Corp is well versed with 5G and not a newcomer in the AI space. They already make 5G devices, and AI has been embedded in Xiaomi’s technology ecosystem such as messaging, instore applications, smartphones, laptops, TVs, routers, speakers, and other smart devices. In fact, Xiaomi Corp claims to have the world’s largest consumer IoT platform with more than 213.2 million smart devices (excluding smartphones and laptops) connected to its IoT platform.
Commenting on the Xiaomi’s competitiveness amongst Chinese smartphone makers and market potential for AI, IoT and 5G globally, Ecosystm Principal Advisor, Tim Sheedy said “Xiaomi has had some recent successes as a smart device maker, with its robot vacuums and other devices quickly earning positive reviews and gaining market recognition. Xiaomi has been able to surpass many traditional players which demonstrates their capabilities of competing in the IoT/smart devices category.”
On the 5G capability aspect of Xiaomi Corp, Sheedy said, “it is early days for 5G – even in China – and the stated position of having many 5G devices in the market could put Xiaomi ahead of some of their competitors in relation to availability. Going forward, it will be interesting to look at the integration of AI, IoT and 5G by Xiaomi.”
Sheedy further added, “we can expect Xiaomi devices to get smarter and more interconnected. Xiaomi actually has the opportunity to take some of the home-centric device hubs out of the ecosystem as they connect straight to the 5G network, and are controlled by an intelligent cloud-based hub perhaps mostly accessed through Xiaomi mobile phones.”
Meeting the Cybersecurity standards
Cybersecurity concerns are common around Chinese device makers. Recently, Xiaomi wireless devices have been disabled from connecting to Google’s Nest devices due to security flaws. On top of this, there have been concerns over the last few years about how Chinese tech companies secure their products and who has access to the data.
“Privacy and security are concerns for consumers – but they are often trumped by convenience, features and off-course price. Xiaomi Corp is aiming to make some of the best devices in each category and as long as they respond quickly and openly to privacy issues, they are likely to continue to see success both inside and outside of China. Their focus on driving down costs in order to be a price leader will help them with this challenge too” said Sheedy. “Ultimately, the privacy and security issues will impact the entire market – not just Xiaomi or other Chinese vendors as the users will steer away from all “smart, connected devices” – not just those from specific suppliers.
Market Positioning Approach
Xiaomi Corporation’s philosophy is to do more business with smaller margins, which drove it to expand its smartphone market from China to other areas like India and Europe. The company is aiming to strengthen its positioning in the consumer electronics market with further tech investments.
Sheedy explains that “considering the fact that they are losing market share in handsets in China, I would imagine that they will double down their efforts to be better at what they do now – not enter entirely new markets. I expect that we will see them produce smarter, connected devices – getting into more of the home and consumer market rather than move into the enterprise market. The enterprise market requires different sales strategies and channels, different partners, different margins, different support mechanisms etc.”
Naturally, Xiaomi is not alone in investing heavily in next-generation technologies. For example, Huawei opened a dedicated IoT consumer lab at the end of 2018 and is continuing to commit resources to the development of this industry-changing technology.
“The 5G plus AIoT strategy is the right one for Xiaomi. They need to surround their competition and make their products better, smarter and more affordable. With the growth in 5G services, a product leadership in this space, beyond smartphones – in smart devices too – will set them up for continued success in what is a very competitive market” said Sheedy.