Xiaomi MIUI 6 – Mission impossible?

Xiaomi is like Apple except for its margins.

• Xiaomi has released the next version of its user experience which will be rolled out onto its phones, tablets and other Android powered devices.
• Google is nowhere to be seen on this device meaning that this software is proprietary to Xiaomi and replaces the functions and services that would normally be provided by Google Mobile Services (GMS).
• The look and feel of the UI is very similar to iOS 7, and it is clear that the aim continues to be to deliver an iPhone like experience at a fraction of the price.
• MIUI 6 has replicated many of the functions of iOS 7 like the app. store, cloud based storage and the media and video experience.
• MIUI 6 includes some Digital Life services such as cloud based storage, media consumption, search and reference but it is still very far short of a full suite.
• Xiaomi is known for the high quality of its devices and its low prices which is both a blessing and a curse.
• It has really helped the company gain market share but it makes it very difficult to actually make any money.
• This combined with the fact that it will now be up against the big Chinese ecosystem contenders Baidu, Tencent and Alibaba, means that there is still a huge mountain to climb.
• The usage statistics and market share are all going in the right direction but I am far from convinced that the company’s financials paint such a rosy picture.
• Most of the other players (Lenovo, Huawei and Sony Mobile) who ship similar volumes to Xiaomi, have higher ASPs and still fail to make anything more than wafer thin EBIT margins.
• Hence, I suspect that even at this new level of volume, Xiaomi is still loss making.
• In order to get margins to improve, Xiaomi will have to differentiate itself further.
• A differentiated offering through its ecosystem will enable it to shed its low pricing as it will have user preferring its devices.
• This is what I believe must happen for Xiaomi to start making a proper return.
• To do this, it will have to broaden its Digital Life offering and that will require further investment.
• Xiaomi has the right strategy and is a force in the Chinese smartphone market but it must now invest in the ecosystem in order to remain there.