September 10, 2014 by ...
Chinese media has been attacking foreign firms of late. Now it would appear that they have Xiaomi in their sights. They previously exposed how Xiaomi phone chargers were poorly made and none of them passed national safety tests. To make things worse, CCTV claimed that the design of such chargers meant that they presented a dangerous fire hazard, a claim later borne out.
Now the communist controlled newspaper has asked Xiaomi if they are snooping on the Chinese. CCTV reported that Xiaomi had done so in Taiwan and asked if such data intrusions were part of Xiaomi’s business model.
The best translation would be that CCTV asked Xiaomi if ‘Xiaomi is stealing data of Chinese customers without consent as they had done in Taiwan.’
Xiaomi’s answer was an unequivocal, ‘No comment.’
Yeah, Xiaomi literally did not field the question. They demurred and have told CCTV that they would get back to them.
This reply is eerily similar to the one they gave when a guy in Hong Kong first reported about Xiaomi data theft. Xiaomi initially said nothing and then slowly but surely admitted to what they had done. In the end Xiaomi sent out a patch to plug up the security hole, but even then it is disputed whether or not the problem had been contained.
The world is enamored with flash sales and tens of thousands of phones being gobbled up in seconds. What many of them fail to realize, however, is that there is much more to Xiaomi than meets the eye. In the mainland there is a trail of frustration and quality concerns which if not addressed, will doom the company to second class status.
Prognosis for Xiaomi?
Sure Xiaomi can sell kit, but it is doing so as a low end player. This strategy is great if they want to remain a ‘mi too’ in the cell phone world.
They have a lot to offer and foreign firms should study the Xiaomi business model to understand how this country works. The things that Lei Jun has done shed valuable insight into the Chinese market. What is apparent, however, is that many of those things are not scalable, at least in the high end markets.
Limit sales limit bad press- The Xiaomi Way?
Perhaps this explains Lei Jun’s reticence to enter the west and or sell more phones where his existing global footprint resides. By limiting production he ‘luxurizes’ a commodity while controlling any negative blowback. For example, if a few people in India or Malaysia are upset, it does not set off a PR brush fire, it is contained. Should he decide 100k units or more, however, such a thing would be much harder to contain.
The data breach is a great example of this. Had Xiaomi phones been sold worldwide, it would have been a PR disaster. Xiaomi was doing something not too dissimilar to the Star N500, which was quickly yanked off the shelves. If they had been a global player, the bloody nose they received from data theft could have cost them precious market share. As it stands, the problem was isolated, at least for now.
Xiaomi is trying to grow while limiting negative press that its goods sometimes create. This is a brilliant strategy in the short term, but what will happen in the long run?
What is your take?