Apple’s looming battle with Xiaomi

SeekingAlpha (free reg-wall):

Xiaomi, the world’s fastest growing phone vendor, has surpassed Apple (AAPL) in China. Canalys Report puts Xiaomi as the third biggest phone vendor in China in Q1 2014. Copycatting the iPhone has made Xiaomi, a four-year old company, the 6th largest global seller of smartphones.

The rapid rise of Xiaomi is due in part to Apple’s complacent attitude towards it. While Apple took Samsung to court for copying some of the features of the iPhone, Apple allowed Xiaomi to become a $10 billion company by selling iPhone clones using the Android OS. Xiaomi hired Google veteran Hugo Barra last year. Barra is spearheading Xiaomi’s expansion in 10 countries this year.

The linked article makes a pretty solid case comparing Samsung’s co-opting of the iPhone look-and-feel with Xiaomi’s approach. While Apple’s lawsuit against Samsung has made the headlines, there’s been nothing made about Xiaomi’s interface.

One possibility is that Samsung brought their business to Apple’s home turf, while Xiaomi has yet to challenge Apple in North America. That is about to change.

Android Headlines:

In an exclusive Android Authority interview with former Google guru Hugo Barra, now Vice President Xiaomi Global, said, “We will start working on North America next year…It’s in the pipeline.” When he said “next year,” he meant 2015, as they already have 2014 mapped out with ten new markets they are preparing to enter. Barra knows that North America represents a very challenging market to make inroads…just look at the problems Sony is having, and they already have a name and reputation for themselves, and let us not forget HTC. Barra has to convince the U.S. that Xiaomi is not just another cheap Chinese smartphone company and this will not be easy task, but I think if any person or any company can do it, Bara and Xiaomi are the ones.

The U.S. market is different from many parts of the world when it comes to purchasing a smartphone – we are used to getting a large subsidiary from our carrier to buy the device on a two-year contract. We pay $200 to $300 for a flagship device, with more perceived features, power and build quality, so why would we pay $250 for a Xiaomi device…in our minds we are getting a $700 device for only a couple hundred of dollars, so why buy a $250 device – even if it has the same features. Barra said, “I believe in the future, people will be less and less tolerant to unnecessarily overpriced devices.” Barra may be correct, but he also has the U.S. carriers on his side as well – they would like nothing more than to get rid of subsidies and they seem to be working towards that goal.

I wonder if Samsung will file suit against Xiaomi. After all, Samsung is the real target here. Xiaomi runs Android and will be more of a threat to Samsung’s market share than Apple’s. And Samsung might have a real case, claiming they were the first to copy the iPhone. Doesn’t that give them some rights?

  • James Wesolowski

    Can anyone come up with their own tech, their own designs and their own style?

    Apple’s aspirations in the Chinese market or not, they most do something about Xiaomi or the Chines, who have proven to have no respect for patents or IP, will knock off everything until there’s nothing left.

  • stsk

    The point is, where is the jurisdiction for Apple to bring an effective suit? Not the US, since Xiaomi doesn’t sell here. China? Yeah, good luck with that. Apple’s not stupid.

    If a suit is to be brought, it should be Samsung vs. Xiaomi, since they blatantly ripped off Samsung’s trademarked strategy of slavishly copying Apple.

  • Herding_sheep

    Xiaomi literally takes the ripping off Apple approach to an entirely new level. We thought Samsung was bad, but they’re nothing compared to Xiaomi. As soon as they start selling in the US you can bet they will become a target of lawsuits. There’s really no way Apple could have taken them in China, the Chinese are notorious for their disregard of American intellectual property. But here in America, Apple could have a pretty solid case against them. They’ve literally copied (not just imitated) everything about the iPhone, from the hardware to the software.

  • matthewmaurice

    Xioami has “surpassed Apple (AAPL) in China.” How? Unit sales? BFD. Their margins are Amazon levels, and that’s because Xiaomi is positioning themselves as a services company. They hope to make money providing services to people who bought cheap smartphones, and they probably will. Apple makes money selling expensive smartphones, and provides services to add value to those high-margin devices. They may have to worry about Apple legal proceedings if the enter the US market, but they’ll definitely have to worry about competing Google and Amazon services if they do. Why would you pick a fight with those two services behomoths? I won’t be surprised is they really don’t enter the US market in ’15.

    • JohnDoey

      You are right. Unit sales of phones is not a metric of success, since most phones are sold at a loss. The maker actually pays the user to take the phone.

  • collider

    And Samsung might have a real case, claiming they were the first to copy the iPhone. Doesn’t that give them some rights?

    lol – that’s priceless, Dave 🙂

  • arnonymous

    After owning an iPhone, (which i think is a great phone) i bought a Xiaomi phone through a Chinese friend. Mostly because of the camera, specs and greater value.

    In my honest impression so far, i believe where they “copy” Apple is not in tech ideas, but in superficial things coming out of the marketing department (product names, presentations) while in tech they bring many of their own ideas (MIUI, weekly OS updates, well thought features…)

    Their phones look nothing like iDevices, a statement which will trigger most to look at the mi pad. But the mi pad is basically an enlarged Xiaomi mi2, a “copy” of the iphone 5c, which came to be 2 years before the 5c.

    anyways my point is, it’s an interesting company with lots of potential making strange marketing choices.

  • Serious question, how does Xaomi copy Apple? The devices look nothing alike.

  • Harold Janson

    As an owner of a xiaomi phone, I really fail to see the comparison to Apple in any way. The only reason americans seem to think that appears to be based on “equivalancy propaganda”. Americans are dumb, and their news caters to that dumbness. Everything has to be compared to something. Weibo? Well, that’s just China Twitter (although it’s not, it’s far better), Xiaomi? Obviously that’s China’s Apple (although it’s not, it’s far better). Random successful online retailer? China’s Amazon (although it’s not, it’s far better). Taobao? China’s ebay (although it’s not, it’s far better). And so on and so on. The fact that China has something better is taboo as far as the news goes. Anything nice must be a ripoff, even when it’s not, especially when it’s not. Whenever a Chinese industry or company takes the lead and drives US competition into the ground… well, then you see China STOLE those jobs or RUINED the good honest mom&pop company. It’s pure propaganda.

    Xiaomi essentially takes a $200 device and sells it for $220. Apple takes a $200 device and sells it for $700. Publically stating that they are focused on beating Apple-spec is not “copying”, it’s competing. Using a similar or even identical material for a case is not copying, it’s plastic, metal or whatever. Xiaomi didn’t copy the design in any way. Xiaomi simply provides a FAR greater value for the money spent on a device and expects to make their larger share from services… but even if you never pay for a xiaomi service beyond the phone itself, they still make money. Next people will be saying that they copied someone else by not having physical stores.

    Here’s what my xiaomi has: Solid feel and weight Massive (removable) battery Top of the line internal spec Great screen Easy to flash, root, whatever Dual-sim card capable Very simple to customize and modify however I want Removable upgradable memory Frequent updates that are painless to install Zero software restrictions on usage, I can use it however I want to.

    Hmm, sounds like things the iphone mostly lacks.