Half the Price, Twice the Value

Little-Known Manufacturer Targets High-End Market in China

Xiaomi is not a handset manufacturer that many people in Europe or the US will have heard of. But that’s not surprising. The Chinese company was only established in 2010 and until last month had released just one mobile phone in China, the Mi-1. Nevertheless, Xiaomi’s appeal in China has been steadily increasing, largely thanks to the alarmingly low retail price of the Mi-1. The company’s now released a follow-up, called the Mi-2.

The Mi-2 features similar specifications to premium products such as the HTC One X, Samsung Galaxy S III and the iPhone 4s. These types of product typically start at €400 in retail stores. The Mi-2 sports Android 4.1, a 1.5 GHz quad-core Snapdragon S4 Pro processor, 4.3-inch in-plane switching (IPS) display with 1280 x 720 pixels and a 2000 mAh battery. Yet Xiaomi is selling the device to consumers on its Web site for just 1,999 yuan (about €255 or $315).


Of course, this is not the first time we have seen handset manufacturers set ambitious prices. Other Chinese handset manufacturers, such as Huawei and ZTE, have done the same. For example, at the start of this year, the Huawei Blaze was released as a sub-£100 product in UK stores. Looking at its specifications alone, you’d have expected it to retail for much more than £100. Its specifications are only slightly inferior to those of the Samsung Galaxy Ace, which was previously around £150.

In China, Xiaomi seems to be making a huge impact with its Mi products, even though the Mi-1 was only sold in batches of thousands. The original retail price of the Mi-1 was estimated to be close to its production cost, and Xiaomi has admitted that it expects the Mi-2 business to operate at a loss for the first two to three years. We believe the company is looking build a loyal groups of fans that will carry the company forward in the long term.

I admire Xiaomi’s decision to target the higher end of the market in China with just a few keenly priced devices. Currently its portfolio includes the Mi-1 at 1,299 yuan (€162), the Mi-1s at 1,499 yuan (€188) and the Mi-2. I think Xiaomi could even use this latter handset to take on the iPhone 4S in China. At 60 percent cheaper than the price of an iPhone 4S 16GB in China, the Mi-2 represents a far less expensive alternative for those shopping for a high-end phone.

In addition, if reports are to be believed, China Unicom is considering ending subsidies for iPhone contract users. This would give Xiaomi a further boost.

For the moment, there are no Xiaomi Mi products being sold in Europe or the US. But there are rumours that something could be coming in 2013. If so, Xiaomi could be a name worth keeping an eye on.