Xiaomi Sets Goal of Becoming Manufacturing Powerhouse in China

(Bloomberg) -- Xiaomi Corp. celebrated its 10th anniversary with the launch of some new products and the promise from its chief executive officer that it’ll become “a major force in China’s manufacturing sector that no one can ignore” over its next decade.

Co-founder and CEO Lei Jun took the stage on Tuesday to recount Xiaomi’s history -- born as an internet upstart that disrupted China’s retail status quo -- and plot out a markedly different course for its future. “Xiaomi will systematically empower China’s manufacturing industry with internet know-how,” Lei said. “Smart manufacturing will fuel the prominent growth of Chinese brands.”

Xiaomi said it has developed a fully automated smartphone assembly line and its investment arm has invested in about 70 semiconductor or smart-manufacturing firms. The smart factories that Xiaomi envisions would compete with manufacturing specialists like Foxconn, also known as Hon Hai Precision Industry Co., which has previously made similar efforts to smarten up its processes. For Lei, it’s an essential move to ensure Xiaomi’s prosperity, as “we can’t defend our industry position without continuing to move forward.”

For the present, Xiaomi remains focused on its consumer business, which was graced by the launch of a new flagship Android phone in the 6.7-inch Mi 10 Ultra, adding to the rapidly expanding stable of 5G smartphones. The device differentiates itself with a 120x zoom system nestled in a large multicamera array on its back along with a super-fast 120W charger in the box. It starts at 5,299 yuan ($763) and will be available from Aug. 16. Alongside it, Xiaomi also unveiled a transparent OLED TV set and a Lamborghini Edition GoKart, burnishing its credentials as a company willing to make bold design decisions.

Now the world’s fourth-largest smartphone brand, Xiaomi was founded by a team including serial entrepreneur Lei and former Google engineering director Lin Bin in Beijing in early 2010. Pioneering an internet-based sales and marketing model, Xiaomi became an instant hit in China where most mobile devices were sold by brick-and-mortar resellers and telecom carriers.

The company distinguished itself by selling phones with sleek designs -- commonly accused of imitating Apple Inc.’s iPhone too closely -- the most up-to-date processors and prices that were a fraction of those from competitors like Apple, Samsung Electronics Co. and Lenovo Group Ltd.

In an effort to expand its appeal and markets beyond China, Xiaomi made a big splash in 2013 by hiring Google’s Hugo Barra, then Android vice president, to lead its international efforts. With his help, the company undertook a campaign to shed its widespread image as an iPhone copycat and invested more in developing its own design and engineering credentials. The company expects to spend 10 billion yuan ($1.4 billion) on research and development this year, Lei said.

At the zenith of its powers, Xiaomi briefly held the No. 3 spot among global smartphone makers and was China’s leader. But around 2016, local competitors Oppo and Vivo cut into Xiaomi’s market share by adopting the opposite strategy to Lei’s online focus: enlisting tens of thousands of private electronics store owners to sell their devices in small towns and villages. The move unlocked access to rural residents eager for their first smartphone, a market with hundreds of millions of potential buyers that Xiaomi wasn’t able to reach.

After some supply chain issues around the same time, Xiaomi slumped to seventh in global smartphone shipments, according to IDC data, and Lei hired former Qualcomm Inc. executive Wang Xiang to steer Xiaomi’s new international expansion strategies from India to Spain and the U.K.

The Chinese company has been on a recent run of introducing futuristic-looking phones featuring industry firsts, such as bezel-less screens and exotic materials like ceramic bodies. Lei has also tried to lift Xiaomi beyond smartphones with an expansive array of other consumer products that can be purchased from the company’s online store, including laptops and luggage.

The Beijing-based company has invested in a large number of hardware startups to make Mi-branded appliances and electronics from rice cookers to scooters. Yet the efforts have so far failed to convince investors that Xiaomi is an internet company rather than a hardware vendor. Xiaomi’s stock has mostly traded below its initial public offering price since its debut in Hong Kong two years ago.

(Updates with CEO quotes from first paragraph)

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