February 26, 2015 by ...
Xiaomi is pursuing global markets for cash. It’s business model relies on thin margins and Walmart-esque pricing to obtain sales. After wringing the Chinese market dry, it’s now going overseas.
Subsequent to investing one-half a year of hard core sales in India and achieving great success, Xiaomi is looking to other large markets, namely the U.S. and Brazil. Due to intellectual property (IP) issues, they won’t be selling anything but communist-themed bunnies and power bricks in the former. Their plans for Brazil, however, are much greater.
Xiaomi to produce in Brasil
Rumor has it that Xiaomi will begin producing phones in Brasil next month. This is a wise move as production there could meet demand from Mexico to Argentina. As most of South America has lax IP laws, Xiaomi could sell their near carbon copy ‘other people’s tech’ (OPT) gear with minimal judicial inerference. This may be debatable, however, as Ericcson took them to task in India, a country not known as a bellweather of IP protection. Of course the jury is still out on that decision and we will just have to wait and see. The fact, however, is that Xiaomi is seeking to expand its global footprint.
In all likelihood, the push at this time is two-fold, they need cash to stay afloat, but more importantly, they need to appear global. This year Lei Jun would like to take them public and being a China-only player would not help their market cap. Sure, it did not hurt China’s Alibaba, but they have a 93% market share in their major product line, something Xiaomi cannot claim. In and of itself this China-centric issue does not preclude Xiaomi from going large, but it will hurt.
Aside from the fact that over 90% of all Xiaomi kit is sold in China is the fact that they face tremendous legal battles going forward. As stated, Xiaomi has an IP theft problem. Most, if not all Xiaomi technology borrows heavily from foreign gear. Even their ‘proprietary’ MIUI operating system is built upon Android and absent opening up its kernel, it too infringes on the EULA and is thus illegal.
This points to major headaches should Xiaomi enter most western economies. This is undoubtedly the reason for their choice in global rollouts.
Brasil is a wise choice
Interestingly enough, choosing India and Brasil are brilliant choices for manufacturing. Both are part of BRICS, which can help grease the skids. Both are huge markets and have well educated workforces too. Based on all logical choices, these two countries stand out. Aside from what has been mentioned above, not only are both governments pushing for manufacturing to be done in-house, but consumers will appreciate the local production too.
The last major point, albeit a cynical one, is that from India Xiaomi can sneak its IP infringing gear across Asia. It can do so through ‘private’ sellers, much like it does in India now.
Look for the same thing as they produce in Brasil. IP infringing phones will not be directly sold to the American and Canadian markets, but will be close enough to be ‘imported’ through grey and or black markets.
By manufacturing in Brasil, Xiaomi is able to have its cake and eat it too.