This Chinese startup could outmaneuver big companies in the coming smartphone boom in developing countries.
Steve Jobs jolted the mobile-phone business by introducing a device that everyone had to copy. Now his unabashed admirer Jun Lei is shaking up the enormous Chinese market with smartphones that cost much less than comparable devices.
Lei is founder and CEO of Xiaomi, which is just four years old but already one of the top six smartphone vendors in China. It entered the business in 2010 by releasing a custom Android operating system, known as MIUI (pronounced “me UI”), whose interface looked a lot like the iPhone’s. It was hugely popular among enthusiasts who love to modify a phone’s functions. A year later, Xiaomi began selling a series of phones that had high-end specs but sold for roughly half of what rival devices were going for in China.
One reason the prices are so low is that Xiaomi (pronounced “zho-me”) sells at or near cost and makes its money when customers pay for its cloud-based services, such as messaging and data backup. The company is also skillful at timing its sales. It presells a very limited number of devices, which invariably sell out, attracting more interest. By the time the later buyers get their devices, manufacturing costs have declined significantly for Xiaomi.
Lei has cultivated a Jobs-like image, all the way down to his personal wardrobe and product announcements. His fans call him “Leibs” (a combination of Lei and Jobs), though his detractors also use the term in mockery. Regardless, his company is getting itself in position to sell a big chunk of the billion Android phones expected to flood the developing world in the next few years as prices keep falling.