Xiaomi Slowdown Due to Mediatek Suspending Chip Production to Them?

Leave a comment

December 1, 2014 by ...

Xiaomi is buying a chip manufacturer called Leadcore. The deal is supposed to lower Xiaomi phone costs. An unexpected result of this purchase is that Xiaomi’s current supplier, Mediatek, has told Xiaomi to kiss off. Mediatek will supply chips to them no more. Xiaomi is betting on the cum and hoping to profit in the future. But is this reasonable?

Business model
Contrary to what Lei Jun says, Xiaomi is not an Internet play. Over 90% of their profits come from the sale of handsets. Xiaomi, however is not a manufacturer either. Similar to Apple, Xiaomi merely assembles phones and markets them.

Twisted logic in buying a supplier?
In order to cut costs even further, Xiaomi is buying into a chip supplier. The problem with this is that it runs contrary to their business model. Once again, Xiaomi is an assembler, not a manufacturer.

The skill sets and value proposition of these two capabilities varies greatly. What has made Xiaomi good has nothing to do with their new investment.

Risky proposition
For Xiaomi this is a risky proposition. They will have to rejigger the way they do business in order to accommodate this change. Such a thing presents reward commensurate with risk involved.

With a lack of experience in this area however, it seems even riskier for a company such as Xiaomi. In its plunge to the bottom of the price spectrum it could mismanage itself out of what made it good.


Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s

Enter your email address to follow this blog and receive notifications of new posts by email.

Join 85 other followers

Stat Counter

counter for wordpress

Member of The Internet Defense League

Blog Stats

  • 50,993 hits
December 2014
« Nov   Jan »
%d bloggers like this: