Internet & Tech

Happy birthday

Milestone as Xiaomi enters the Hang Seng Index


Lei’s tech firm is now a decade old

One of the best-known stories in the classic Chinese novel The Romance of the Three Kingdoms tells of how the warlord Liu Bei persuaded the famous strategist Zhuge Liang to help him draw up a plan to unify the country. Liu Bei is said to have won Zhuge Liang over by making three visits to his thatched cottage in Hubei province.

For Xiaomi founder Lei Jun the story is an analogy for the efforts he made to attract talented recruits to the tech company during its early days. It didn’t take three “thatched cottage” visits but 30, he told the audience during the company’s tenth anniversary celebrations earlier this month.

Lei Jun was also celebrating Xiaomi’s achievements over the past decade. He said he was particularly proud that it had joined the Fortune 500 list in 2019 after only nine years of existence. Xiaomi says it now wants to go from “10 to infinity,” focusing on smart manufacturing to create ‘innovative products at honest prices for all’. But it has always been a company that divides opinion, especially after its IPO didn’t go as smoothly as planned in 2018, when it was forced to cut its valuation.

The Hong Kong-listed stock is still hovering close to its HK$17 listing price after dropping to a low of HK$8.39 in November last year. It has done better over the past few months (and from next month will be included in the blue-chip Hang Seng Index) but investors are still cautious, aware that Huawei might not be the only Chinese smartphone manufacturer to run into political problems with the US government.

The good news is that Xiaomi displaced Huawei as the third largest vendor of smartphones in Europe during the second quarter with a 17% market share, according to Canalys data (Apple is on 21% and Samsung 30%). Xiaomi’s shipments grew 65% year-on-year. The company is also the market leader in India, despite Covid-related headwinds that prompted a 48% decline in shipments year-on-year.

In the Unites States the prospects look less promising. On August 5, the US government said it was amending its Clean Network programme “to prevent untrusted PRC smartphone manufacturers from pre-installing – or otherwise making available for download – trusted apps on their app store”. It isn’t clear if that is a step towards blocking American-made apps on Chinese phones in general but the threat is undoubtedly there. And a few days earlier, the Indian government included Xiaomi’s Mi browser as part of its ban on a growing number of Chinese apps, a move said to be prompted by national security concerns, prompted by a festering border dispute with China.

Domestically Xiaomi divides opinion too. Few doubt Lei Jun’s promotional abilities as a one-man marketing machine across social media channels ranging from Bilibili to Xiaohongshu. But netizens query some of the substance behind the spin. “Lei Jun dresses like Steve Jobs with his T-shirts and jeans,” says one. “But Xiaomi’s nothing like Apple. There’s no tech or design, just low prices.”

“Xiaomi just uses low prices to attack rivals,” another netizen cautions. “There’s no innovation.”

Lei Jun addressed the allegations during the tenth birthday speech, highlighting that his company will be bumping its R&D budget up to more than Rmb10 billion ($1.44 billion) over 2020, in line with rivals like Oppo and Vivo. He also showcased Xiaomi’s ecosystem, which includes investments in 70 companies, many in the ‘smart living’ sector. Xiaomi has also become one of China’s leading TV manufacturers since the beginning of 2019 and hopes to grab more share with a new model that uses the latest in OLED technology to create a transparent screen from front-to-back, edge-to-edge. That will silence critics who say that it lacks an edge in innovation and design, the company hopes (it sells for Rmb49,999).

Lei Jun says he understands how rapid change across the global economy is creating anxiety, making it harder for some brands to reach into new markets. He combats the uncertainty himself in a simple way. He has set himself a goal of walking 10km a day for a month, claiming that he feels inner peace and warmth as he walks towards the sun.“Successes can’t be well planned, while crises may be once-in-a-lifetime opportunities,” he concluded of his folksy approach. “Plan together, walk further,” he added.

© ChinTell Ltd. All rights reserved.

Sponsored by HSBC.

The Week in China website and the weekly magazine publications are owned and maintained by ChinTell Limited, Hong Kong. Neither HSBC nor any member of the HSBC group of companies ("HSBC") endorses the contents and/or is involved in selecting, creating or editing the contents of the Week in China website or the Week in China magazine. The views expressed in these publications are solely the views of ChinTell Limited and do not necessarily reflect the views or investment ideas of HSBC. No responsibility will therefore be assumed by HSBC for the contents of these publications or for the errors or omissions therein.