Corporate China

Weibo: Xiaomi skips Barcelona, litigation challenge looms

PUBLISHED : Monday, 03 March, 2014, 11:22am
UPDATED : Monday, 03 March, 2014, 11:23am

Much of the China tech world was focused last week on the world's largest telecoms trade show taking place in Barcelona, but one company that was noticeably absent from the Mobile World Congress was fast-rising smartphone maker Xiaomi. That absence was all the more noticeably because Xiaomi has made no secret of its plans for a global expansion this year as part of a strategy to maintain its explosive growth in the four years since its founding. Xiaomi seems to have skipped the big show this year, and instead focused its energies on its own internal suppliers meeting, as reflected by a flurry of microblog posts from that event. 

Meantime, an executive from the equally globally-minded Lenovo (0992.HK) drew attention to a major challenge that Xiaomi will face in its global march, namely exposure to lawsuits and patent disputes. Western companies are much less aggressive in their pursuit of licensing fees and patent litigation inside China, largely due to the lack of experience by Chinese courts in such lawsuits. But those same companies are much more aggressive outside China, especially in western markets where courts are much more experienced at handling patent disputes.

I should begin by saying my conclusion that Xiaomi didn't attend the Mobile World Congress in Barcelona last week was based on indirect evidence, since I didn't personally attend the show. Nearly all of China's major telecoms players were at the event, with executives from Huawei, ZTE (0763.HK; Shenzhen: 000063) and Lenovo all making numerous posts on their microblog. But there were no such posts from Xiaomi's talkative top executives, and the company's name was also absent from the show's official exhibitor list. That leads me to conclude the company had no official presence at the event, though I do suspect that some of its representatives probably attended as visitors.

On the one hand Xiaomi's absence at the show comes as a bit of a surprise, since it has talked frequently about its global expansion plans for this year and is preparing its first major foray abroad with a Singapore launch planned for later this month. It has also said it could soon push into other developing markets like Malaysia, and has hinted at a possible move into the US. Against that backdrop, it's a bit surprising that Xiaomi wouldn't want to use such a major platform as the Mobile World Congress to showcase its products and hype its global plans.

But then again, Xiaomi's charismatic co-founder and CEO Lei Jun was never one to use traditional channels to promote his company, preferring to create backdoor buzz through more indirect means. Rather than attend MWC, Xiaomi executives spent last week at a more internally-focused supplier conference, which was attended by 12 suppliers and more than 500 people in the company's home city of Beijing. Several top Xiaomi executives were tweeting from the event, including Lei Jun himself. None of the posts were too exciting including Lei's, which simply thanked all the company's suppliers for their support. 

Meantime, Lenovo chief marketing officer Wei Jianglei was also offering some of his own observations on Xiaomi, pointing out the company could face some difficult challenges from litigious western patent holders as it moves outside its protected home market. Huawei and ZTE have both become involved in such lawsuits in the past, and the big western names themselves often attack each other with such patent infringement lawsuits.

Wei notes that Xiaomi could face especially high costs in cutting-edge 4G, where patented technology is particularly expensive. He offers his own suggestion that Xiaomi might have a better chance of success in tablet PCs where technology is more mature and less costly. I doubt that Xiaomi will take that particular advice, as its global expansion strategy does seem focused on its low- to mid-range smartphones for now. But the threat of patent litigation is very real, and Xiaomi would be well advised to hire a strong legal team if it decides to move its global expansion into lucrative but tricky and competitive western markets.

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