Chinas Plan to Rule the World: Make All the Gadgets

Xiaomi became the world’s most valuable startup following astraightforward plan. “We noticed a trend of switching from feature phones to smartphones in China,” says Liu De, who co-founded the company in 2010. “We thought, ‘Hey, there could be a big opportunity there.’” So Xiaomi made good phones, stirred up excitement for them online, and sold them at a good price. By 2014, itwas the fifth-largest seller of smartphones on the planet and worth $46 billion.

Instead of just making and selling smartphones, Xiaomi wants to make and sell just about everything.

It didn’t last. Fellow Chinese upstarts Oppo and Vivo now outsell Xiaomi, which has seen its Chinese market share drop by more than a third. Users are now buying their second or third phones, andare willing to pay more to get more. Even as the average price fora smartphone droppedworldwide, itspiked in China as people embraced flagships like the Huawei P9 and Oppo R9. Xiaomi may be worth a fraction of what it once was, and faces the question that’s plagued the likes ofBlackBerry andApple: You had one good idea. Now what?

For Xiaomi, the answer is build the coolest, most desirable phone anyone’s ever seen, and move into any marketthatisn’t already saturated. Oh, and instead of making and selling smartphones, make and sell just about everything.

The rest of the world won’t be so simple. The US in particular poses a problemto Xiaomi and everyone else. “Its biggest challenge will be trying to get in through traditional channels,” says Tuong Nguyen, an analyst at research firm Gartner. Xiaomiexcels at selling phones online, but Americans don’t buy phones that way, and getting into an AT&T store is tough. “Huawei, whos been in it a lot longer than they have, can attest to how hard that is,” Nguyen says. It’s the same story in Latin America. “It’s often much cheaper and more convenient for me to walk to the store and look at the phone, rather than look at it on my phone, because bandwidth is so expensive,” Nguyen says.

Another problem: People don’t associate Chinese brands with innovation or luxury. They aren’t cool. And don’t forget that President Trump has made it clear just where he stands on China and everything made there. Still, the growth potential is so great that Xiaomi can’t not try. It helps that the time is right for an Everything Company with a suite of connected devices. “I dont need more boxes,” Nguyen says. “I have lots of boxes that do many things. But I dont have boxes that work together.”

Everyone wants tobuild the one system that unites all things, the sole platform for all theconnected thing in your life. If one company could not only build the platform, but the things as well, it wouldchange everything. And it may only be possible if that company is made in China.

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