Xiaomi Plans to Expand Into Southeast Asia

DECEMBER 9, 2013, 12:31 PM

Xiaomi Plans to Expand Into Southeast Asia

By ERIC PFANNER

TOKYO — Since August, when the Chinese mobile phone maker Xiaomi lured away a top Google executive, Hugo Barra, to oversee its international expansion plans, two big questions remained: When and where would Xiaomi turn its attention? Over the weekend, the company provided some clues.At a media event in Taiwan, Xiaomi executives, including Mr. Barra, said the company planned to set up shop in Southeast Asia early next year. When pressed for details, the company’s press office said Singapore and Malaysia would be the first markets in the region to get Xiaomi phones.

So far, Xiaomi’s only major forays outside mainland China have been into Taiwan and Hong Kong. There, the company has stirred up considerable interest. On Monday in Taiwan, a “flash sale” on the Internet of 10,000 of the company’s Hongmi phones sold out in less than 10 minutes, the company said.

Xiaomi has generated considerable attention because of the company’s marketing savvy, with some analysts comparing the hype that surrounds the brand and its founder, Lei Jun, to the excitement that accompanies anything related to Apple and its former chief executive, Steven P. Jobs, in the United States.

Yet Xiaomi’s phones are considerably cheaper. The Hongmi, for example, is priced at 3,999 Taiwan dollars, or about $135. For cost-conscious consumers in mainland China, the difference is especially stark — Apple iPhones list at $750 or more.

For these and other reasons, Xiaomi has quickly built a following. Still, its market share in recent quarters in China has hovered at around 5 percent — substantially below the leader, Samsung Electronics, but rivaling Apple. Xiaomi executives have said the company is on track to sell 19 million phones this year and plans to have twice as many sales next year.

Xiaomi has benefited from the chaos of the Chinese mobile business. The company has sought to bring some order, integrating its hardware with an attractive content and software offering. Xiaomi’s phones use the Android operating system, developed by Google, but Google’s mobile application store, Google Play, is not officially available in China. That leaves plenty of room for alternative app stores and other content providers.

Yet analysts wonder whether Xiaomi can be equally successful abroad. For starters, competition will be fierce. In addition to giants like Samsung, other Chinese smartphone makers like Lenovo and Huawei have big plans for markets like Southeast Asia.

Mobile app stores like Google Play and Apple’s App Store are more established outside China, making one of Xiaomi’s big selling points less attractive unless it comes up with must-have content.

“It may not be easy for Xiaomi to replicate its success in China,” said Melissa Chau, an analyst at IDC.

Xiaomi has also been willing to sell phones at low prices in order to get people to buy its content. This effectively amounts to subsidizing phone sales — something Chinese network operators are reluctant to do. Elsewhere, subsidies are more prevalent.

But Xiaomi executives in Taiwan signaled that they would remain flexible, adapting their business model as needed.

“In some countries, carriers act like they do in Taiwan,” Mr. Barra said at a news conference, according to the website Tech in Asia. “They’re in the business of selling phones and offering subsidies. In other countries they’re not. So our strategy will vary a little bit from country to country.”