Xiaomi has emerged as a leader in China’s smartphone market largely on the back of affordable price tags. But with the release of the company’s latest model today come questions of whether it’s shifting its focus to a more premium market.
The company launched its new flagship smartphone, the Mi 9, at a press event in Beijing on Wednesday — the same day Samsung is releasing its latest model, the S10. In a Feb. 13 post on social app WeChat, the Chinese company called the Mi 9 the “best-looking Xiaomi smartphone model so far.” In the week ahead of the product launch, Xiaomi left a trail of teasers on its social media accounts, unveiling a number of key specifications and features. The phone has a triple-lens camera at the back and a holographic cover that changes color when you look at it from different angles, and it’s the first Xiaomi smartphone powered by a Qualcomm Snapdragon 855 microprocessor, the leading hardware option for Android devices.
But above the premium features, it’s the new phone’s high price that’s attracting the most attention online. The two Mi 9 options are priced at 2,999 yuan ($450) and 3,999 yuan — almost 1,000 yuan more than the new model’s predecessor, the Mi 8, and just less than the latest iPhone. On microblogging platform Weibo, netizens are wondering whether the higher-end model means Xiaomi is abandoning its reputation as a manufacturer of practical, budget-friendly phones. “Why would anyone with 5,000 yuan buy a Xiaomi instead of an iPhone?” one netizen asked.
The company’s co-founder, Lei Jun, weighed in amid the online discussion. “Xiaomi’s flagship products must throw off the restraints of a cost-to-performance ratio and instead focus on making the best products possible and meeting the expectations of Mi fans,” he wrote on his official Weibo account. “The manufacturing and R&D costs of the Mi 9 definitely aren’t cheap, and we can’t expect to sell [this model] at a very low price.”
China’s smartphone market is a notoriously unforgiving battlefield — not only for foreign brands like Apple and Samsung, but also for large domestic players. The country’s top four market leaders — Huawei, Vivo, Oppo, and Xiaomi — are all Chinese: Figures from American market research firm IDC show that these four companies made up roughly 78 percent of the China market in 2018, up from 66 percent the year prior. Huawei, Vivo, Oppo, and Xiaomi are also investing heavily to win fans in overseas markets like Europe, India, and Southeast Asia, where their phones can compete with the iPhone at a fraction of the price.
But as China’s smartphone market reaches saturation, product sales are shrinking. “The sharp [year-on-year] decline can be mostly attributed to the generally lengthened upgrade cycle of consumers and average price increases,” James Yan, research director at Hong Kong-based analysis firm Counterpoint Research, wrote in October of last year. “Fierce competition among local players in the mid-to-affordable premium market has forced [the companies] to continuously improve their [products] and roll out advanced features that are more akin to premium level smartphones.”
AI-powered processors, bezel-less screens, and dual or triple cameras are some of the key selling points that smartphone manufacturers aggressively market. Given consumers’ thirst for more and better features, competing solely on price might not be the smartest move, says Bai Yin, a technology blogger based in the southern megacity of Guangzhou. According to an October 2018 report from Beijing-based Sino Market Research, the average prices of both foreign and domestic phones increased over the past year. “The cost of making a phone is going up, so naturally price needs to follow suit,” Bai told Sixth Tone, adding that even if smartphone makers are reluctant to raise their prices, they must do so if they hope to continue turning a profit. Bai says he doesn’t think lower prices alone are enough to meet consumers’ evolving tastes in today’s market.
Amid all the buzz about the Mi 9’s price point, loyal Mi fans are saying they’ll still support the company and its more expensive products. “Don’t compromise yourself on cost-to-performance ratio. Keep your research and development on more premium models. We can afford it,” one Mi fan wrote in a post later shared by Xiaomi’s Lei.
“People question whether Xiaomi has given up on the cost-to-performance ratio as a point of emphasis,” the company’s co-founder said to those present at Wednesday’s product launch. “My answer is, absolutely not.”
Editor: David Paulk.
(Header image: Lei Jun (left), co-founder of smartphone company Xiaomi, and Wang Yuan of Chinese pop group TFBoys, introduce the Mi 9 smartphone at a product launch event in Beijing, Feb. 20, 2019. IC)