Chinese upstart startup smartphone company, Xiaomi, is expanding out of Asia – a first for this company which is China’s largest smartphone company with an estimated 12.5% market share according to IDC. Not bad for a company that’s only been around since 2010.
Xiaomi attributes its success to supply chain. According to a 2013 article from Want China Times, the company maintains close relations with its Taiwanese manufacturing partners such as Inventec and Hon Hai for assembly, Wintek, TPK for screen technology, and Unimicron for printed circuit boards and Taiwan Semiconductor Manufacturing for processors. In addition, Guangzhou’s Money Week magazine notes Xiaomi has more than 100 Chinese domestic suppliers with most from southern China, such as Lens Technology Co, Biel Crystal Manufactory, O-Film Tech, Sunlord Electronics, Sunwoda Electronics and Zowee.
Within the past year alone, Xiaomi has extended its Asian supply chain and products into Taiwan, Hong Kong, Singapore, Malaysia, Indonesia, the Philippines, and India.
With such a complex supply chain already in place, Xiaomi is now venturing into Brazil. According to IDC, Brazil’s smartphone sales have doubled since 2012 to an estimated 1.45m units for 2015. However, Brazil presents a unique situation for the Chinese company – a redesign of its supply chain. The Brazilian government heavily taxes electronics imports but provides tax breaks to manufacturers that assemble products and source components locally. As a result, Xiaomi has tapped its manufacturing partner, Hon Hai (Foxconn), to assemble devices in Brazil. Xiaomi will source some components locally while still importing remaining components.
But Brazilian labour and parts are expensive and because Xiaomi is known for selling its smartphones at low prices it will be interesting to see if and when the company can turn a profit in this difficult country.
Beyond Brazil is a host of other countries in which Xiaomi plans to expand and extend its supply chain towards including Turkey, Russia and Mexico. According to some analysts, it is likely Xiaomi will focus on emerging markets due to the fact that consumers tend to be more price-sensitive. However, earlier this year, Xiaomi opened a somewhat limited online shop in the US to sell accessories such as headphones, battery packs and a fitness tracker. Perhaps this was done to test the American waters?
Xiaomi presents an additional option for consumers and businesses besides long time leaders such as Apple and Samsung. Emerging markets offer a vast opportunity in which companies such as Xiaomi can effectively compete and grab market share from the likes of Apple and Samsung which sell their products at a much higher price. The greater the competition the better for consumers in these markets, particularly as they increase their ability to become connected in the global e-commerce market.