Depth report

　　

Xiaomi, which was once the world's most highly valued "unicorn", seemed to be reduced to one of China's largest "unicorns" in the previous stage: it burns money and is in a supply dilemma. Now, as the fortunes are picking up, Xiaomi's great drama has entered the next scene: the Chinese Phoenix reborn from the ashes.

    According to consulting firm IDC, in the second quarter, the Beijing-based technology company once again entered the top five global smartphone manufacturers, with shipments of 21 million units, a year-on-year increase of 59%. Xiaomi produces everything from smartphones to smart rice cookers.

    Lei Jun, the founder and CEO of Xiaomi, mentioned that before this recovery, he experienced "a year of setbacks, which can be said to be the most challenging period in our company's history."

    At the time of financing at the end of 2014, Xiaomi’s valuation reached 45 billion U.S. dollars, surpassing Uber's valuation of 40 billion U.S. dollars at the time. However, due to the loss of market share by smaller competitors, Xiaomi did not realize the 2015 mobile phone Shipment target.

    Xiaomi's top three positions in China's smartphones are given to up-and-coming stars Oppo and Vivo. According to Gartner (Gartner), Oppo and Vivo, just like the previous Xiaomi, emerged as the second and third most popular mobile phone manufacturers in China in the second quarter of 2016.

    "In the past few years, we rushed too fast and created a growth miracle in the history of modern business, but we also overdrafted part of the growth in advance," Lei Jun, who learned from the pain, wrote in a memo published on his WeChat account and Facebook in January this year. Tao. "We must slow down and make up lessons seriously, and it is better to make up early than to make up later, and to make up slowly than to make up quickly is better than quick medicine."

    Many industry observers gave Xiaomi full marks for this. "A good quarter has allowed Xiaomi to return to the arena as a heavyweight in the smartphone industry," Radio Free Mobile's Richard Windsor wrote in a recent briefing to customers.

    The total number of employees of the company has increased from 10,000 to 14,000 in the past year. Zhou Shouzi said this was part of a long-delayed recruitment campaign. He said, "We have the same valuation as our peers, but the number of employees is only a small part of them."

    Sustainability is a big issue. "This recovery needs to last more than one product cycle in order for it to maintain its strong position," Windsor said.

    Xiaomi's transformation plan is a three-pronged approach: improving technology, expanding distribution, and globalization.

    Technically, Xiaomi has begun to design its own processors to reduce battery weight and reduce dependence on foreign manufacturers such as Qualcomm. So far, Xiaomi has applied for more than 16,000 patents and obtained 4,000 patents.

       The same strategy has helped Oppo and Vivo win customers in areas outside of China's wealthy big cities, where many people do not go online. Hans Tung, a partner of GGV Capital and an early investor in Xiaomi at Qiming Venture, said that Xiaomi has taken the physical store one step further, selling a series of home appliances in the store-all products They all come with apps, so that they can form a smart home and open up a potential source of revenue.

    "Every product has apps that can control it; when people use these apps more and more, you can sell ads," he said. For example, smart home assistant speakers are logical extensions. Then you can add Internet services, such as games, and online advertising.

    The strategy is showing signs of success. Xiaomi is now the world's highest-selling manufacturer of wearable devices, occupying a 13.4% market share in health bracelets, which is higher than Apple and Fitbit, which was once the leader in this field.

    Today, Xiaomi has opened 137 "Xiaomi Homes" across China, branding itself at a uniform price both online and offline, and at the same time, it has also achieved the near-impossibility of maintaining operating profit margins. The company claims that due to Combining online and offline, physical store sales costs are the same as online sales costs.

    Global expansion may be Xiaomi's boldest step. So far the company has focused mainly on emerging markets.

    Xiaomi claims to rank third in sales of mobile phones in Indonesia and fourth in sales in Russia. The company pays special attention to the Indian market; in India, Oppo and Vivo have won a large number of fans through their smart sponsorship of the cricket league.

    Kavin Bharti Mittal, founder and CEO of Hike Messenger, an Indian unicorn company backed by Tencent, said that Xiaomi is a niche brand, but it is deeply involved in this volatile market. being respected. "Smartphones are replaced every 12 months, which is the average level in India," he said. "The key lies in price and features."

    Neha Dharia, a senior analyst at telecom consulting firm Ovum, agrees. She said that as people's loyalty to mobile phone brands becomes history, Chinese brands are sweeping the Indian market. Xiaomi said that more than 95% of Xiaomi phones sold in India and Indonesia are locally produced, although considering the complexity of the supply chain, this often refers to assembly rather than a complete manufacturing process.

    But Daria pointed out that the mobile phone market is still volatile, and the rise of Indian telecom operator Reliance Jio will further disrupt this market by boosting 4G demand (thanks to the company’s $63 mobile phone).

    The future will depend on which manufacturers can keep up with the supply, which has proven to be Xiaomi’s Achilles’ heel.

    Currently, Lei Jun’s “small goal” is to reach 100 billion yuan ($15.3 billion) in revenue this year, and to ship 100 million smartphones in 2018. For the more distant future, he has become a bit more ambitious, claiming that Xiaomi's future is like a "sea of stars".