Xiaomi – The vulture dance.

Xiaomi’s looks to be going after Huawei’s business.

• Xiaomi’ latest launches signal a change in direction for the company that I suspect has been triggered by Huawei’s problems which have created the opportunity for Xiaomi to take its place in overseas markets and especially at home.
• Xiaomi’s “Mega Launch 2021” event revealed a new smartphone with a variant to match each segment of the market that Huawei used to occupy as well as wearables. accessories and a home projector.
• The new Mi 11 comes in a number of guises all with fairly familiar specifications and for the first time, the prices to match.
• The Mi 11 Lite starts at $434, Mi 11i starts at $649, Mi 11 Pro starts at $762 while the Mi 11 starts at $1,410.
• Gone are the days when Xiaomi produced good specifications at a rock bottom price and instead it is competing head-to-head with the other flagship phone providers.
• Huawei has clearly demonstrated that Chinese companies can build outstanding quality smartphones and I think that Xiaomi is vying to take over the mantle that Huawei has been forced to relinquish.
• This trend showed up in the other products that it launched where its Mi Smart Band product is priced at $53 and its Mi Smart Projector 2 Pro which is priced at $1,176.
• RFM research indicates that Huawei is pretty close to running out of components which combined with complete inaction on the part of the White House, means that its smartphone business is about t grind to a halt.
• Xiaomi has been classified somewhat strangely as a Chinese military company (see here) but this only prohibits USA citizens and investors from buying the shares and does not in any way hinder Xiaomi’s ability to buy components or sell its products.
• Hence, I think that Xiaomi is going hard and fast after the market share that Huawei is about to lose, and I suspect that it will be pushing especially hard in China.
• Running out of components means that Huawei’s China business will also grind to a halt and as a result, a huge amount of domestic market share is now up for grabs.
• I think that this is going to be the focus for Xiaomi as one of its main rivals overseas, Samsung, is virtually absent from the market and it is where there is the largest volume opportunity.
• This is likely to mean a major marketing push to make the most of the opportunity and so I would not be surprised to see Xiaomi’s margins come under some short-term pressure.
• However, if it can take a large slug of Huawei’s Chinese share, it might just begin to justify the valuation at which it trades.
• One to keep an eye on.