Three and Mi

Will Xiaomi's Deal with CK Hutchison Be a Springboard to the West?

On 3 May, Hong Kong-based CK Hutchison and China-based Xiaomi announced a global strategic alliance. Under the agreement, Hutchison will begin selling Xiaomi smartphones and connected consumer products from its Mi Ecosystem in Three stores. Xiaomi products will also be sold by A. S. Watson Group, a major health and beauty retail chain majority-owned by Hutchison that includes stores like Fortress, Superdrug and Kruidvat.

For Xiaomi, the deal provides it with a new level of sovereignty. This recognition by a major global operator group will give it exposure to tens of millions of subscribers in many leading European markets. To be more specific, its products will be sold in Three retail locations in Austria, Denmark, Hong Kong, Ireland, Italy, Sweden and the UK. Three has almost 45 million active mobile subscriptions in the six European countries.

Xiaomi has risen quickly since it started selling smartphones in 2011 using a flash-sales model and a competitive offering. It might have derived its design language from other major smartphone makers, but it began building its brand value and marketing its hardware in unique ways, which, after some hiccups ultimately worked well in China and other Asian markets (see Xiaomi Shines a Light on Its Business). Xiaomi was the fourth-largest smartphone supplier in the world during the first quarter of 2018, selling 28 million units. This was thanks to a solid position in China and a surge in sales in India, where it's now the largest phone-maker by volume. Further details about the mobile phone market in 1Q18 will be published in CCS Insight's upcoming quarterly report.

Things are different in Western markets for Xiaomi. In Western Europe, Xiaomi sold less than 1 million smartphones in 1Q18, mostly in Spain, where it formally began sales, but also in other European markets through online channels such as Amazon. This gives Xiaomi much less than 1 percent of the Western European market. Nonetheless, its appetite for growth is clear.

Xiaomi has never hidden its aim to make it big in the West and has previously broadcast its intentions to enter the US market. With an upcoming initial public offering (IPO), Xiaomi needs to meet heightened expectations for expansion. In fact, with a valuation currently expected by financial analysts of about $70 billion, a successful entry into Europe and the US is a believable ambition.

It's perhaps no coincidence that this partnership news came on the same day as the formal IPO announcement. Hutchinson is providing Xiaomi with a level of recognition it needs. Xiaomi has now grown beyond being a challenger hardware maker, and as a top-five player can now claim a seat at the "top table".

In the US, Xiaomi is likely to initially sell smartphones on the open market, unlocked and unaffiliated to a specific wireless carrier. But we believe that Xiaomi is likely to be courting several of the major carriers in hopes of getting a device into their portfolios. Although the open market is a growing segment in the US, it's only about 15 percent of the market. For mass-market sales in the country, the phone-maker must get exposure to carrier channels. Logic would suggest a personality match with T-Mobile US, given the challenger mentality of the two companies.

Despite Xiaomi's success in other markets, we note that the company has a lot of work to do to increase its brand value in the West. Even with exposure and carrier stores, success is not guaranteed; better-known brands like Huawei and Lenovo have struggled. But for Xiaomi, this is a shining Mi Three moment that provides it with a new clout.

Sign up to our free Daily Insight service here.

This entry was posted on May 18th, 2018 and is filed under Devices. You can follow any responses to this entry through the RSS 2.0 feed or you can leave a response.

Posted By Raghu Gopal On May 18th, 2018

(There are no comments yet)
Leave a Comment

Hot News

Team Tweets

CCS Insight
Recent study sparks fresh concerns about excessive phone use, as blue light from screens may be much more harmful t…
Follow CCS Insight
Shaun Collins
Congratulations Conor and Harvey. Brilliant effort from the lads, 49 mins and all in an really worthwhile cause.…
Follow Shaun
Ben Wood
RT @nickmcquire: As we predicted last year & will show at #ccspredicts in a few weeks, it has turned up a notch again in 2018 with implicat…
Follow Ben
Martin Garner
Great briefing yesterday from @qualcomm's @wellingmax on the need for energy-efficient AI with edge computing. The…
Follow Martin
Geoff Blaber
Crypto mining has been a consistent thorn in Nvidia's side. When demand was up it upset core customers. Now it's do…
Follow Geoff
Marina Koytcheva
@caro_milanesi Ah yes :) My mum grows zucchini and stuffs flowers with rice- delicious!! Do you grow your own zucch…
Follow Marina
Nicholas McQuire
As we predicted last year & will show at #ccspredicts in a few weeks, it has turned up a notch again in 2018 with i…
Follow Nicholas
Angela Ashenden
Chuckling watching Five Star’s System Addict on old #TOTP2.. in some ways it’s quite prophetic, if you can get past…
Follow Angela
Kester Mann
DT in an apparent swipe at United Internet, which is considering bidding in the upcoming German 5G auction and then…
Follow Kester
George Jijiashvili
For the Galaxy Note 9, Samsung is offering £300 trade in discount in addition to 0% finance to the owners of Note 8…
Follow George
Laura Simeonova
RT @benwood: P20 devices testament to Huawei's ambition in smartphone market. Consistently improving design, capabilities and appeal of its…
Follow Laura
Katie Taylor
Opt-out donation plan 'will not increase donors' - why you should let your family know your wishes
Follow Katie

Recent Blog Posts

Blog Post
Serious Concerns about Blue Light from Screens Researchers Say Extended Exposure Could Accelerate Blindness... Read more
Blog Post
Starry Internet, the Sequel Start-Up Launches Its Wireless Internet Service across the U... Read more
Blog Post
India's Ola Announces UK Push Ride-Hailing Company Looks for a Gateway to Europe Last wee... Read more
More blog

Latest Company News

Blog Post
Angela Ashenden Joins CCS Insight to Lead Business Collaboration Research Enterprise Research Coverage Continues to Expand ... Read more
More news