China’s Xiaomi rolls out two low price phones it hopes will vault it to top spot in India

With both new models under 1,000 yuan, Chinese smartphone vendor has made sales volume a priority over profit margins – and India is its No 1 market

PUBLISHED : Thursday, 07 December, 2017, 8:03pm
UPDATED : Thursday, 07 December, 2017, 11:09pm

With its eyes on becoming India’s top smartphone brand by year end, China’s Xiaomi has introduced the latest models of the phones that are likely to get it there, hoping to fire a shot across the bows of bigger rivals Huawei and Apple in the process.

The full-screen model Redmi 5 and Redmi 5 Plus, available for sale from Tuesday next week, carry a starting price that is one tenth that of iPhone X.

“Xiaomi has just introduced the cheapest full-screen smartphone among the top 10 vendors worldwide. The attractive price will enable it to grab market share from rivals,” said Yan Zhanmeng, research director for consulting firm Counterpoint.

The launch in India comes as Xiaomi is close to claiming market leadership in the country that is the world’s second largest phone market – as well as the fastest-growing. According to statistics from research firm IDC statistics, Xiaomi and South Korea’s Samsung Electronics each held 23.5 per cent of the market share in India during the third quarter, with Xiaomi almost tripling its shipments year on year and doubling them quarter on quarter during the period.

India Xiaomi’s No 1 priority as Chinese firm eyes country’s demand for cheap smartphones

With both models under 1,000 yuan, a price space where Xiaomi once carved out its place as the world’s most valuable start-up, the smartphone vendor has clearly made sales volume a priority over profit margins.

Margins for the Redmi 5 could be as slim as 2 per cent, compared to roughly 8 per cent for its rivals Oppo and Huawei, according to Yan.

The Redmi 5 features a 5.7 inch, 18:9 ratio full screen, with fingerprint identification scanner, 12 megapixel back camera and fast-charging support, with a starting price of 799 yuan (US$121), while the Redmi 5 Plus sells for 999 yuan with 32 gigabytes of storage.

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India has emerged as top priority for Xiaomi, even more so than its home market of 1.4 billion people in China, where most of the population are obsessed with cost-effective electronic gadgets, according to Xiaomi founder and chief executive Lei Jun.

“We have adopted the India as No 1 strategy, which includes design, research and development, manufacturing and supply,” Lei told Indian media last month.

By October, Xiaomi had already reached its 2017 annual targets of 100 billion yuan in sales and 70 million smartphone shipments. The company is targeting shipments of 100 million handsets next year.

The Redmi 5 launch also comes amid reports that Xiaomi is planning an IPO in Hong Kong next year. According to Bloomberg, the 7-year-old start-up is seeking a valuation of at least US$50 billion.

The company is refusing to comment on the IPO, but analysts said the offering is expected to give it much-needed ammunition to expand in the 60 global markets it currently sells to.

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Founded in 2010, Xiaomi – literally translated as Little Rice – has become known for its flashy online marketing campaigns and long-term pursuit of an ecosystem of products beyond smartphones, ranging from scooters and air purifiers to coffee makers and smart speakers.

But the company that briefly held the title of world’s most valuable start-up in 2014, stumbled last year, with shipments plunging due to fierce competition in China. Rivals Oppo and Vivo fought back against Xiaomi by developing strong ties with retailers in China’s rural regions and by going head to head with it in overseas markets including India.

Since then, Lei has been pushing bricks and mortar offline shops under the Mi Home brand as a way to complement its online sales strategy.

“Xiaomi has been gaining ground over the past few quarters. The budget model Redmi 5 will enable it to boost sales both at home among younger and female users and abroad in markets like India, where consumers earn less and are more conscious of cost-effective phones,” said analyst Yan.