Xiaomi – Toys and eye candy

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MIUI 7 launch demonstrates limitations outside of China.

• Xiaomi has launched the next version of its user experience MIUI but the lack of discussion around its ecosystem reinforces the view that it has very little outside of China.
• New Delhi was the location of the launch which meant that all of the announcements had to be relevant to English speaking users.
• This is why I suspect that Xiaomi’s Digital Life services and ecosystem ambitions were nowhere to be seen.
• This is the clearest sign yet that Xiaomi’s ecosystem is only relevant in the Chinese market raising the question of how it intends to compete in the rest of the world.
• The launch of MIUI 7 made it very clear that, for the moment, Xiaomi intends to do this by competing in the user interface as this is where the focus of the upgrade has clearly been placed.
• There has also been a heavy focus on India as Xiaomi is very much driven by its community of which 65% of the English speaking part originates from India.
• The main new features of MIUI 7 are:
  • A series of new themes that have been very carefully designed with matching colours and textures.
  • The ability to select simple games that can be run on the lock screen.
  • Daily lock screen. This is a collection of photos that Xiaomi has licenced exclusively and automatically appear on the lock screen each day.
  • App start time has been optimised to make it faster but the difference was so small that a slow motion camera had to be used to demonstrate the difference.
  • Battery life has been improved but in the demonstration, the capacities of the batteries in the competing devices were 5% and 10% less, rendering the test meaningless.
  • Child Mode to prevent children from deleting apps or accidently running up huge bills.
  • Showtime which is a really fun feature that allows a user to record a video and then when a contact is called, the receiver sees that video on the lock screen.
  • Specifically for non-Chinese users (India):
    • Visual IVR. This shows automated telephone system menus on the screen to allow selection of the options without having to wait for the audio prompt. 50 Indian companies signed up.
    • Data Saver. This is a function that channels all the device’s data through Opera Max resulting in up to a 50% saving on data usage.
    • Incremental improvements to SMS messaging to deal with the handling of system messages and one-time passwords.
• Overall MIUI 7 offers incremental upgrades that both bring it into line with competitors as well as adds some frivolous innovations designed to appeal to users in emerging markets.
• This will help with differentiation outside of China which is one of the biggest challenges that the company faces.
• Its Chinese ecosystem has little relevance to users who are not Chinese, which is why for devices outside of China, it has been forced to use the Google ecosystem.
• This means that Xiaomi users will be using Google’s Digital Life services resulting in users being part of Google’s ecosystem rather than Xiaomi’s.
• The profitability of Apple and Google clearly indicates that it is the ecosystem where the money is being made these days, raising the question of how Xiaomi will manage that outside of China.
• Consequently, I remain concerned that the UI tweaks shown in MIUI 7 will not be enough to really drive user preference when it comes to purchasing a Xiaomi device leaving Xiaomi as a commodity outside of China.
• To justify a $45bn valuation, Xiaomi needs to be earning decent margins on its devices which is far from the case today.
• Inside China it also has a fight on its hands as Baidu, Tencent, Alibaba and China Mobile are also all vying to be ecosystem players in a market that I think is big enough for three to be successful.
• Xiaomi has first mover advantage, but its recent loss of momentum needs to be reversed if it is to overcome its potent opposition it in its home market.
• I suspect it will be a very long time before Xiaomi goes public.