For the foreseeable future, the smartphone industry in the US will be dominated by Samsung and Apple – yes, HTC and LG, especially, will sell their share of devices, but it is Samsung and Apple that own the market. The Chinese companies are starting to make their mark in the US, such as Huawei and Lenovo, now that they are making Motorola devices. One powerful Chinese company, Xiaomi, is selling millions of phones but have not yet made their way into the US market. Xiaomi may be the one Chinese company that can make some real inroads into the US – they do not have the espionage taboo hanging over them as Huawei does, and their Vice President of Global Sales, Hugo Barra, was a longtime Google employee.
One thing is for certain – Xiaomi will be coming to the US – they are simply ‘paving the way’ to make it happen. With all of the logistics to sort out, it looks like it will not be until 2017. Hugo Barra said in an interview, “The US is a very different market. I think the natural time will come. It’s certainly not this year.” It was much easier to build up a loyal fan base in countries like Brazil and India with their high quality and low price strategy. These markets were ripe for the picking, but Hugo says the US market will take a year or two of “preparation” before they can launch a Xiaomi device in the US. This preparation involves clearing the way for a successful run – being ready for patent battles is one hurdle and learning how to work with the US carriers will be another, especially when up until now most sales are conducted at Xiaomi’s website as they sell directly to their customers.
The patent battles are something that most of the big players in the US smartphone business have to deal with and something that Xiaomi is already getting a taste of – but will Xiaomi be able to protect the company enough before the start hitting the US? Xiaomi says they are ready, and Xiang Wang, Xiaomi’s senior VP of mobile said, “Definitely, we are aware of those challenges in the patent area. We are in a battle.” Xiaomi has filed 3,000 patents in 2015, and he claims they are buying up others to pad their portfolio. Barra says you have to buy essential licenses for the basic things you need to make your phone work. After that, you have to deal with the patent trolls – small companies that buy up patents for the sole purpose of suing the bigger companies for patent infringement – it is how they make their money. Also, let us not forget the large, legitimate competitors that want to protect their property rights. Barra said, “We’re very well prepared. There’s no mystery involved in this territory. It’s very predictable.”
Cozying up to the carriers is another problem that Xiaomi will have to resolve to score a real impact in the US. As I mentioned earlier, most of Xiaomi’s sales come from direct online, while the majority of Americans buy their devices from their carriers – either in store or online. This is one piece of the puzzle that does not work in Xiaomi’s favor, but they do have a relationship with Google and Facebook, not to mention they have Hugo Barra as well – a well-known and trusted name in the Android world. More and more US buyers are getting comfortable with online purchases, and this could bode well for Xiaomi as they carve out their niche in the US. Barra said, at the time we entered, India was only about 10% e-commerce. Now it’s at about 30%.”
Once Xiaomi does make its way to the US, it will be interesting to see how their sales will affect Samsung and Apple. If Xiaomi can keep making quality devices for a reasonable price, it may knock the wind out of their rivals’ sails as both Samsung and Apple charge a premium amount for their flagship devices. Most of the techie people know about Xiaomi, but the average buyer has never heard of them. It will take a while to build that relationship, but it is nothing some well-placed advertising couldn’t fix. Sometime in 2017, we should begin to see Xiaomi start to hit the US, and it can do nothing but increase competition and innovation.