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Online strategy drives Xiaomi's IoT goals

Posted: 06 Jan 2015 ?? ?Print Version ?Bookmark and Share

Keywords:smartphones? mobile Internet strategy? IoT?

As we usher in the New Year and head for the International Consumer Electronics Show in Las Vegas, we look back at how players fared in the global consumer electronics industry.

Xiaomi, a company that won't be present at CES, is scoring heavily.

Earlier this week, China's Xiaomi announced a windfall of $1.1 billion from investors in its latest round of funding. As Reuters reported, this "cements [Xiaomi's] status as one of the world's most valuable private technology companies at a valuation of $45 billion."

Investors love Xiaomi because it represents a new generation of CE companies. Unlike Sony, Sharp, Panasonic or even Samsung, Xiaomi attracts the investment community because the hardware vendormasquerading as a "mobile Internet" companycomes without baggage.

Xiaomi has no factories, no physical retail stores and no inventory. Xiaomi only sells on the Internet, with no third-party distribution.

More important, Xiaomi's founders grasp the flexibility and nimbleness enabled by the Internet. Xiaomi typically produces its phones in small batches and launches over the Internet. Between batches, the company continues to perfect its new product and trim costs. Sometimes, it also upgrades parts by switching suppliers.

The company's online strategy has also worked well with Chinese consumers. As consumers saw Xiaomi's new phones getting snatched up in a matter of minutes and quickly sold out on the Internet, they've become that much more eager for Xiaomi's newest model.

Sure, Xiaomi is manipulating mass-market psychology, masterfully. This has helped the company build its brand. But it isn't just marketing that enabled Xiaomi to get where it is today.

It's a mistake to underestimate the company's technology prowess. Xiaomi is not the cheap, me-too smartphone company that the rest of the world expected from Chinese brands several years ago. Xiaomi has successfully built a reputation for quality smartphones packed with reliable parts and components that were handpicked by Xiaomi's capable engineering team.

Reuters says that Xiaomiat $45 billionis worth nearly three times the market capitalisation of Lenovo Group Ltd, the world's No. 1 PC maker, and more than quadruple the $10 billion valuation it garnered during its last financing round in 2013.

Clearly, Xiaomi is a smartphone vendor. But by styling the company's business model as "a mobile Internet company," Xiaomi has become a darling among investors. As one Chinese electronics industry source pointed out to us, "As you know, the market value of an Internet company is much higher than a traditional hardware company."

Participants in the latest round of funding include private equity funds All-Stars Investment, DST Global, Hopu Investment Management, and Yunfeng Capital, as well as Singapore sovereign wealth fund GIC, Chief Executive Lei Jun said Monday on Weibo.

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