Xiaomi's appliance bet with Midea seen diluting its smartphone focus
Acquisition of stake in Midea raises questions over smartphone maker's ability to compete with cash-rich internet rivals
Smartphone maker Xiaomi has become the new big spender in China's technology sector, with a 1.27 billion yuan (HK$1.6 billion) investment in Midea Group pushing it further along an acquisition trail blazed by internet giants Baidu, Alibaba Group and Tencent Holdings.
But the deal for a 1.3 per cent stake in the appliance manufacturer, announced last weekend, has prompted a warning from industry experts that Xiaomi's priority should be to protect its product margins rather than splash cash around.
The two companies said they would cooperate on "smart" home business, e-commerce and the mobile internet. Xiaomi will send an executive director to join the board of Guangdong-headquartered Midea.
"Xiaomi has seen what it can gain from making smartphones, and wants to copy the success to other fields - home appliances is the next," said Xie Wen, an internet analyst and former Yahoo China president.
"But I wonder if it is mature timing for Xiaomi to be aggressive in acquiring a stake in another firm. With a 1 per cent stake, what will Xiaomi get from Midea?"
Mainland technology leaders have been actively carrying out mergers and acquisitions to leverage their strengths by expanding into related fields, such as applications and content.