Xiaomi to focus on markets in Europe due to US / China trade war
China’s hi-tech industry was caught flat-footed by the trade war between the US and China, and it is now shifting its focus to compensate.
Xiaomi Corp, a Chinese smartphone giant wants to focus on European operations in 2019, as the trade war has severely curtailed its plans to expand in the USA.
Lei Jun, the CEO and chairman of Xiaomi, which is listed in Hong Kong, recently chose to ignore questions about the company’s US activities, but said that the firm’s main focus for international expansion would be the European market this year.
He added that the company aimed to rank in 1st or 2nd position in several European countries’ smartphone markets, especially Spain.
This strategy is a virtual turnaround from the one Xiaomi stated in March. At that time, the aim was to expand US operations by late 2018 or early in 2019. The company was planning on launching a model of smartphone specifically tailored to the markets in the USA, while distribution would have been supported by the biggest mobile network operators in that country.
The strategy shift outlined for Xiaomi is a reflection of how the trade war between the USA and China has had a huge impact on China’s hi-tech industry. This battle has the potential to slow down Chinese expansion in industries ranging from self-driving cars, wireless network products and smartphones, to financial technology, semiconductors and e-commerce.
Although there is currently a three month ceasefire in effect to allow negotiators to try and end the trade war, it is expected that the big technology companies in China as well as national initiatives will continuously be exposed to challenges in the coming year year as the two biggest economies globally fight for global dominance in hi-tech innovations.
In a recent company statement, Xiaomi revealed that it planned to invest more than USD148 million (10 billion yuan) in the next 5 years in AI (artificial intelligence) and smart connected devices. The aims to be driven by IoT (the Internet of Things), AI and smartphones in the future.
Lei noted at Xiaomi’s annual company assembly that it is facing internal and external challenges, i.e., the need to make sure Xiaomi’s management and organization can respond to the rapid growth of the company, and slower global demand for smartphones as well as the US-China trade war.
These new plans for the company which is number 4 on the global list of smartphone suppliers, have come after an effort to curtail the decline in the share price failed. The slide started after the 6-month IPO lock-up period expired recently.
The company’s two major shareholders, Smart Player Limited and Smart Mobile Holdings Limited, and Lei promised that they won’t sell any of the shares they hold in Xiaomi for at least another year on the same day.
Xiaomi shares fell about 20% over a period of 3 trading days to reach an all-time low of HK$9.97. Since its high in July, a wider tech slump eroded more than 50% of the firm’s market value.
Lei is however optimistic that investors will realize the company’s long-term value despite the bearish market.
Xiaomi maintains 3 markets geographically: India, the Chinese mainland and the rest of the world. These holdings include businesses in 70 territories and countries outside China.
According to the company’s financial results in Q3, more than 44% of the company’s revenue is derived from markets overseas including Europe and India, where it has expanded significantly. Xiaomi’s aim is to have business overseas account for half of its entire revenue.
The firm also has plans to move into African and the Middle Eastern markets.
A Counterpoint Research report does however indicate that Xiaomi’s domestic smartphones market share has decreased to 13% in Q3. This has been reduced from 14% a year earlier.
This led to Xiaomi unveiling a restructuring in December. The restructure created a new Chinese team to enhance investment in and increase focus on the Chinese markets.
Xiaomi’s Redmi smartphone, part of their budget line, was converted to a new sub-brand recently. This strategy will enable the firm to chase the higher end segments of the international market. The company also created Poco, another sub-brand, last year in India. The Poco will be used to target premium segments of the 2nd largest smartphone market globally.Source