In the past 10 years, Xiaomi has established itself in the smartphone market by virtue of its “high cost-effectiveness” and has become one of the top smartphone giants in China.
The sudden attack of the epidemic in 2020 caught many smartphone manufacturers off guard. With the new Mi 10 series, Xiaomi took advantage of the opportunity to hit the premium segment and started the journey of Xiaomi’s high-end smartphones. The Xiaomi Mi 11, released at the end of 2020, has become a brand new high-end work by Xiaomi.
Recently, Lei Jun launched a meaningful question on Weibo: If Xiaomi releases a high-end smartphone worth 10,000 yuan ($1548), would you buy it? Some users were thinking it should be the Xiaomi folding screen phone. In any case, what can be glimpsed is that Xiaomi is eager to try the high-end market again.
In fact, it is not a day or two for Xiaomi to hit the high-end market. However, Xiaomi’s “cost-effective” label in consumers’ minds is still strong. So, what should we think of Xiaomi’s frequent trials of the high-end market?
Does Xiaomi Want to Have Top-end Smartphone at Low Price?
In the current competitive landscape of smartphone arena, Apple, Samsung, and Chinese manufacturers are in a three-pronged position. In recent years, as Huawei breaks through from the Chinese army, the high-end smartphone market has gradually taken shape. With the OV and other smartphone manufacturers one after another are joining the race to take advantage of a solid position in the high-end market.
In early 2021, Xiaomi, VIVO and OPPO have successively released or announced their own strongest new smartphones of the year. The head-to-head fight may not make the decision for a while, but behind this protracted battle, it reflects the future of smartphones.
As a smart hardware product, it is impossible to insist on the so-called price-performance ratio instead of pursuing profit. Otherwise, there is no way to have more money to do research and development to consolidate its own moat. This is why Xiaomi decided to enter the premium market with the Xiaomi Mi 10 series.
The added value of high-end phones is much higher than that of mid- and low-end phones. To a large extent, it represents the most cutting-edge technical capabilities of the current smartphone industry, and better reflects the technical capabilities of smartphone manufacturers. Generally speaking, consumers who buy high-end smartphones have a higher level of consumption. They are willing to pay for new technologies and brand premiums. So relatively speaking, the brand awareness of this group of people will be stronger.
External factors are an important reason for Xiaomi’s deployment in the high-end market. But some market anxiety that Xiaomi has faced over the years has become the reason why it must transition to high-end.
Xiaomi’s 2020 Q3 financial report can even illustrate this point. In the 11 months ending on November 18, 2020, the cumulative global sales of the Redmi Note series were 140 million units, but the global sales of high-end flagship smartphones led by the Xiaomi Mi 10 series only exceeded 8 million units. As we all know, Redmi Note is originally a smartphone positioned in the mid-range market, which also means that Xiaomi at this stage is still stuck in the mid-range market.
The “cost-effective” brand strategy is particularly advantageous in terms of volume and product breadth. However, in terms of brand image, it will inevitably become a second-rate brand, and cost-effectiveness has become a double-edged sword for Xiaomi. So it seems logical to seek high-end breakthroughs.
In addition, the changing pattern of the smartphone market this year has also provided Xiaomi with a better time to enter.
In the third quarter of 2020, Xiaomi’s smartphone revenue was 47.6 billion yuan, a year-on-year increase of 47.5%; smartphone shipments reached 46.6 million units, a year-on-year increase of 45.3%. In the third quarter of 2020, the global market share of Huawei smartphones fell to 14.7%, and the Chinese market share also fell to 41.4%.
With its advantage in shipments, Xiaomi surpassed Huawei in the third quarter of 2020 and rushed to the third place in global shipments, fought a beautiful turnaround.
In addition, the “ban on sales” has led to insufficient supply of Huawei chips and restrictions on the use of GMS services in Huawei smartphones. The shipment volume of Huawei smartphones from the second half of 2020 has shown a sharp decline, which will probably continue until 2021. For Xiaomi, it is a good time to take advantage of the momentum to enter the high-end market.
In addition, Xiaomi’s increase in the high-end market means that it is a bit of a strike while the iron is hot. Huawei’s Mate 40 series products have been unanimously recognized by Chinese consumers. However, due to supply problems, many popular high-end products, including the Mate 40 series, are out of stock.
For Xiaomi, if it does not make phones for the high-end market, it will inevitably be eliminated by the times; if it does, it cannot completely abandon its own market advantages.
Making Premium Smartphones is Not An Easy Deal
For Xiaomi, entering the high-end market may not be easy.
On the one hand, in the existing high-end market, Apple, Huawei, Samsung, etc. have already occupied a certain market share. At this time, Xiaomi’s entry into the high-end market will inevitably cause the suppression of corresponding competitors.
According to the IDC report, as of the first half of 2020, Huawei smartphones accounted for 44.1% of China’s high-end smartphone market, Apple accounted for 44.0%. Thus, these two got nearly 90%, while other smartphone manufacturers scored a 10% share.
In the face of increasing market competition pressure, Xiaomi has been forced to carry the price-performance ratio on its own shoulders. The veteran smartphone giant once again returned to the domestic market. Motorola brought the brand-new Edge S with a starting price of 1999 yuan. Helpless in every possible way, Lei Jun can only decide to use the Mi 10 to fight. So the Xiaomi Mi 10 series has reduced the price by 400 yuan.
On the other hand, from the consumer group level, few existing customers are willing to pay for Xiaomi’s high-end products. The majority of Xiaomi’s user groups are still pursuing high quality and low price. Changing the existing audience of an established brand is not an easy task itself. And since the day of Xiaomi’s birth, the price-performance ratio that Xiaomi advocates in traditional cognition has been far away from the notion of high-end products.
Prior to this, at the Xiaomi conference in early 2021, “moving products with good prices.” Lei Jun said that high-end products do not mean expensive.
Xiaomi always believes that high-end products do not mean high-end prices. The ultimate product experience is the root of high-end. It is necessary to do the ultimate experience at all costs, but the high-end products will inevitably lead to the high-end prices, and the development of high-end technology is inevitable.
In terms of core technology, Xiaomi still lacks core technology compared to Huawei, Samsung, and Apple. Huawei has self-developed Kirin chips, Samsung has industry-leading screen design, and Apple has iOS system. In contrast, Xiaomi’s components are all from third parties.
All in all, smartphone players in the high-end market are already preoccupied. As a latecomer, Xiaomi does not have an advantage. Whether it can seize more market share in the high-end market in the future is still full of uncertainty. However, it is foreseeable that with the impact of some risk factors on Huawei in the international market and the background that Apple is not dominant in 5G, charging, high refresh screens, etc., for Xiaomi, sprint to high-end is the best time. Looking at the entire industry, high-end niche will inevitably be another arena for smart hardware players.