When Steve Jobs died last year, many Chinese questioned whether their own country could ever produce someone quite like like Apple’s former chief executive and founder. Perhaps they are starting to get an answer to their query.
Lei Jun seems to have something in common with the former tech genius and digital visionary. For a start, he is often spotted wearing a black T-shirt and jeans (though Jobs preferred black mock turtlenecks). Lei also founded one of China’s buzziest tech firms, Xiaomi. Like the iPhone, Xiaomi’s handsets are often some of the most talked-about gadgets in China.
“China’s media say I am China’s Steve Jobs,” Lei told Reuters in a recent interview. “I will take this as a compliment but such kind of comparison brings us huge pressure.”
For now, at least, the Beijing-based smartphone maker seems to be on the right track. Xiaomi, founded only two years ago, recently raised $216 million from investors including Morningside Group, IDG and Temasek in a round that valued the company at $4 billion. That was a quantum leap from June 2011, when Xiaomi was said to be worth a quarter of that.
Xiaomi handsets cost Rmb1,999 ($320). The company’s pitch is that they feature “specifications that rival the fastest mobile phones from international brands” but that they sell for “half the average price of devices with similar processing power”. According to Xiaomi’s own figures, 3.5 million units of its first model, the MI1, have been sold since it was launched in late October 2011. Sales for the latest model, the MI2, which went on sale in October (also for Rmb1,999), are forecast to hit 5 million units. For context, about 130 million smartphones were sold to Chinese customers this year.
Even before Lei started Xiaomi, which means ‘little rice’ in Chinese, he was well-known in China’s venture capital circle, owning stakes in a number of promising start-ups.
In 1992, Lei joined Kingsoft, an anti-virus software firm, after graduating from Wuhan University. In less than 10 years, it has grown from five people to more than 3,000 employees, having listed in Hong Kong in 2007. Lei is still its chairman and owns about 12% of the company. That stake is worth around $60 million, according to Forbes magazine.
While working at Kingsoft, Lei started Joyo.com as a side project. Joyo began as a download site but later became an online bookstore. Amazon subsequently acquired it for $75 million in 2004 , rebranding it as Amazon.cn.
After Kingsoft went public, Lei spent much more of his time investing in other start-ups. He owns minority stakes in a number of online enterprises including Vancl and Lakala, two e-commerce firms that have done exceptionally well in their sectors (see WiC109 and WiC58, respectively, for more on these firms).
And then there’s YY, where Lei is again one of the largest shareholders. The social gaming portal listed on Nasdaq recently (see last week’s issue), yielding a hundred-fold return for Lei on his initial $1 million investment. Forbes reckons that Lei’s stake in YY is now worth at least $129 million.
“My investment philosophy is that if I lose money, I tell myself that I’m just supporting innovation. But if I make money, I think of it as winning the lottery,” Lei wrote in his blog in 2008.
“The fact is, I only need to put in a little money and watch these talented people turn their interesting ideas – bit by bit – into reality. I get to interact with these passionate people every day and share their entrepreneurial enthusiasm. What a joy!”
That’s a pretty good attitude to have – although you need the financial wherewithal to be able to afford it.
Most of Lei’s bets appear to have paid off. Forbes estimated that the entrepreneur had a net worth of $1.5 billion back in October, making him one of the 400 richest men in China. His net wealth will go up again in the rankings for next year after accounting for the windfall from YY’s IPO.
Along with money comes status. Like Jobs, Lei has something of a cult following. When he unveiled the new Xiaomi MI2 at a press conference (invitation-only, of course), crowds of fans greeted him enthusiastically. Reporters even gave real time updates on the presentation. The first day the handsets went on sale they sold out within two minutes.
Taking a page out of the Jobs’ playbook, Lei is adept at causing a stir. Xiaomi releases its new products in small batches – making only 50,000 units of the MI2 available when the phone was launched – which stimulates pent-up demand, as well as generating free marketing and PR buzz. Subsequent batches, although larger, also sold out within minutes, says Private Economy News.
So is MI2 worth the hype? The new handset looks similar to the iPhone 5 and Samsung Galaxy S3. And judging from different tech blogs, the Chinese smartphone also rivals the two better known handsets when it comes to performance, even though it comes in at less than half the price of Apple’s iPhone 5. Some bloggers are claiming that the MI2 renders a better graphics performance than the Galaxy S3 and iPhone 5 too.
But Xiaomi is not without critics. Some say that its products score well on price and technical specifications, but that they will never win points for imaginative design.
“This is a world where people are now cranking out ‘black back flats’. That’s what all these phones are. When you put 10 on the table… Xiaomi is not going to stick out,” says Michael Clendenin, managing director at RedTech Advisors.
“In this world, the market is driven by two things: one is massive volume and two huge brands.”
Others expect that Xiaomi will have to deal with challenges in product quality and after-sales service, once the post-launch buzz starts to fade.
China Business Times says some customers are already complaining about “poor workmanship” on the new phones, as Xiaomi ramps up production volumes. Nor does it expect Xiaomi’s customer service centres to be prepared to handle a larger number of questions or complaints.
But for the time being, Lei can afford to ignore the warnings.
Xiaomi is already profitable and is expected report revenues of up to $2 billion this year. Lei says he’s not keen on an initial public offering, saying that Xiaomi would end up spending too much time on trying to please investors, distracting it from building its brand and product range further.
“In this industry, I think the most important thing is to get love from your customers,” Lei told Reuters. “If you are popular with your customers, you succeed.”
That was certainly the philosophy that won Jobs and Apple an army of devotees.
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