Xiaomi’s Ten Years, Lei Jun’s ‘Three Iron Laws’

In March 2011, Xiaomi was just established. In order to get the screen suppliers of smartphones, Lei Jun, Lin Bin and Liu De, the three co-founders of Xiaomi, regardless of the risk of nuclear leakage caused by the Japanese earthquake, embarked on a journey to Japan to visit Sharp.

Nine years later, Lei Jun looked at the photo taken from the SD card of the old smartphone, standing at the head office of Sharp, and warned young entrepreneurs: ‘You must take more photos at all nodes of the company.’ They were standing at the head office of Sharp in Osaka with a desperate mood after the suppliers have closed their doors. No one could imagine that ten years later, there will be such an opportunity to stand in the 5.2 billion Xiaomi Technology Park and share Xiaomi’s entrepreneurship with the public story.

Ten years are not long – Lei Jun’s signature smiley face and accent seems to have not changed. Ten years are not short – China’s smartphone industry has undergone earth-shaking changes, and Xiaomi has also grown from a ROM team to the top 500 in the world.

Xiaomi has experienced almost everything in a startup company in these ten years. It has seen years of success and fail, beating many competitors and meeting new rivals, personnel shocks and business adjustments, listing, etc.

At this tenth anniversary node, Xiaomi held a special press conference. In addition to releasing three ‘Ultra’ products, Lei Jun also gave a tenth anniversary keynote speech. The theme was ‘Going Forward’ (this is the name of Xiaomi’s first official autobiography). On the main poster, Lei Jun is riding a Xiaomi balance bike. This is also Xiaomi’s first offline event after the epidemic has stabilized.

Xiaomi's ten years

The conference lasted more than three hours. Lei Jun fondly recalled the early days of entrepreneurship and also looked forward to Xiaomi’s future vision. The three products released that day were also Xiaomi’s best summary of the past. According to Lei Jun’s words, these three products represent the ‘technology-based, cost-effective, and coolest products’ law. Following these, we can also sort out the development context of Xiaomi’s products in the past ten years.

Technology-based

The Mi 10 Ultra comes with a few eye-catching features such as the screen, charging, and photography. These are also difficulties that Xiaomi has focused on over the past few years. Photography is especially worthy of attention.

Xiaomi's ten years

Starting with the P20 Pro in March 2018, Huawei showed who the king is in this field. It has not only gained sales, but more importantly, the brand value has been greatly improved.

Xiaomi couldn’t sit tight. In May 2018, Lei Jun issued an internal email announcing the establishment of a separate camera department in the smartphone department, and Zhu Dan served as the general manager of the newly formed camera department. At the Mi MIX 3 conference in November of the same year, Lei Jun publicly stated for the first time that the goal of the camera department was to overturn Huawei.

In 2016, there were 26 engineers related to Mi Camera. And by 2019, there were 624 members in the camera department. In the past period of time, Xiaomi and Samsung launched a 100-megapixel CMOS.

The Xiaomi Mi 10 Ultra defeated Huawei for the first time in a true sense and took the first place on the DxOMark list.

Although there is some controversy about DxOMark’s credibility, for Xiaomi, this is actually a competition with itself.

‘Xiaomi’s founding team are all technically born’. Lei Jun always likes to emphasize this point. But we should say that Xiaomi has never stood out due to its technical achievements.

If Xiaomi wants to truly practice ‘technology-based’ competition, it needs to break away from pure product functions and technology and go back to the industrial chain and manufacturing level. For example, the Surge chip has been announced four or five years ago. But until today, we haven’t seen anything new from this field. Lei Jun admitted at the press conference: ‘The path to the chip is difficult.’

At this press conference, Lei Jun also introduced Xiaomi’s smart factory plan and announced that it will invest 10 billion yuan ($1.48 billion) in R&D in 2020, which is conservatively estimated to rank among the top 20 of all companies in China.

Cost-effective

The one that represents the price-performance ratio is the Redmi now led by Lu Weibing. The K30 Ultra directly brought the starting price back to 1999 yuan ($296).

Xiaomi's ten years

Starting from 1999 yuan for Xiaomi’s smartphone generation, price-performance ratio has become the most prominent label of Xiaomi. ‘To make the world’s best smartphone, sell it only for half the price. So everyone can afford it.’ This is Lei Jun’s vision when he founded Xiaomi. Whether it is Xiaomi or Redmi, in the period of fighting, they all rely on price as a killer to sweep the market.

On the eve of the IPO, on April 25, 2018, Xiaomi held a press conference at Wuhan University. Lei Jun announced a board resolution: Xiaomi’s hardware comprehensive net profit margin will never exceed 5%. If there is any excess, it will be returned to the user. In fact, if you look at Xiaomi’s financial data, you will find that the comprehensive net profit margin of Xiaomi hardware has never reached 5%. After all, software subsidies for hardware are exactly what Xiaomi’s troika needs to achieve.

In the past few years, there has been no lack of criticism from the outside world about Xiaomi being tied to the price-performance ratio and unable to move towards the high-end. Xiaomi’s brand image has indeed been affected by this. But the price-performance ratio is written in Xiaomi’s genes. It is like the foundation of the Xiaomi building. Even the transparent TV at this press conference is a product that shows muscles, Xiaomi dare not set a too high price.

In the past, every time the price of a product increased, Xiaomi trembled. For the first time, the Xiaomi Mi 6 increased its starting price from 1999 yuan to 2299 yuan ($340). The Mi 10 stepped up to the 4000 yuan ($592) level.

The Redmi K30 Ultra is such a cost-effective product. For 1999 yuan, can you buy a Samsung smartphone with a 120Hz AMOLED screen, Dimensity 1000 processor with a perfect 5G support, large storage, and large battery? There are no competing products with the same specifications in the same price range on the market. This is also the product with the ‘best price’ spirit of the entire conference. Lei Jun said that returning to the 1999 yuan price is a tribute to ‘born for fever’.

Xiaomi's ten years

Lei Jun once said that Xiaomi’s price-performance ratio will never sell smartphones at a loss. You can only attribute the victory of Xiaomi’s model to such a base price.

The so-called ‘outline’ refers to methodology and values. In the past ten years, Xiaomi has started by relying on cost performance, not only for its own brand, but also for ecological chain companies. According to Lei Jun, in the next ten years, Xiaomi will still not lose this label. Cost-effective means low profit margins. How to maintain profit margins at a level that can be explained to investors? The market remains one of the most important issues for Xiaomi in the next ten years.

Make the coolest product

The second model of the Mi TV Master series is the most technically powerful product in this conference. In fact, LG (also one of several giants in the TV industry) has been engaged in transparent TV. In 2017, LG exhibited the prototype of transparent TV at CES. This TV is based on OLED technology, the panel can achieve a nearly transparent effect while displaying the picture. And the vase behind the screen can be clearly seen.

Xiaomi's ten years

Of course, this technology has an impact on the display effect. The prototype that LG showed that year only had 1080P resolution (55 inches). Xiaomi has achieved mass production of transparent TVs ahead of LG. It already went on August 16. The price is quite less, ‘only’ 49,999 yuan ($7402), which greatly reduces the threshold for early adopters.

Xiaomi's ten years

The effect of this TV is undoubtedly amazing, and the public opinion reaction after its debut reminds me of the MIX generation.

Xiaomi's ten years

Looking back on the history of Xiaomi’s development, there are many reliable and cheap products. But the one that really deserves the coolest is actually only the first-generation MIX. (MIX Alpha, which was glimpsed at the press conference, has been determined to be unable to mass production. It’s not in the scope of discussion). Although the Sharp AQUOS S2 is ahead, the MIX generation is still the first manufacturer among mainstream brands to come up with a full-screen solution. Even the first MIX generation made a furor, while the rest of the generations were more modest. Its frame was narrower and the earpiece was changed to screen sound. It sacrifices cost and part of the experience in exchange for the coolest design.

According to Xiaomi’s autobiography, ‘Indomitable’, the MIX generation project was first approved in 2014, regardless of commercial costs and not driven by commercial purposes. Lei Jun regarded it as a venture investment product.

It is a pity that MIX’s follow-up models have become ‘compromise’ for sales and overall experience. Plus, the MIX 3 has become a ‘cost-effective’ product, wiping out everyone. Now, there are no new products in the MIX series.

Lei Jun emphasized at the press conference: ‘It is Xiaomi’s eternal pursuit to insist on making the coolest product.’ But the price-performance ratio and the coolest product seem to be a natural contradiction. Because for technology companies, cool means new technology, and new technology means R&D investment. Excessive R&D investment is spread evenly on each device. And it seems difficult to keep prices low. How to balance R&D and market, not only Xiaomi, but all technology companies face the same test.

Where are the next ten years?

Xiaomi’s first decade has passed.

In the past ten years, Xiaomi has experienced the re-emergence of the smartphone industry after its first decline. It has also experienced a decisive decision. In 2015, in the face of a decline in sales, Lei Jun personally grasped the product and supply chain.

Another more important achievement of Xiaomi is the discovery and incubation of a large number of hardware start-ups. Zhang Feng of Xiaomi’s first foundry, IAC, later founded Zimi Technology; Huami’s made the first generation of smart bracelets for Xiaomi and put Huami on the market. Chang Jing, introduced by Lei Jun at the press conference, got the investment from Xiaomi to start the sweeping robot project. Now he is one of the most important players in this field… These new players in different fields, like catfish, turned the calm water of the pool.

As for the next ten years, Lei Jun’s strategy is to ‘re-enterprise, Internet + manufacturing, stable and in a long-term.’

The so-called re-enterprise is to abandon the past achievements and use new models and new talents. The young people who continue to come to the front of Xiaomi, are the main forces.

Internet + manufacturing means to participate in manufacturing more deeply. It is worth mentioning that the main components of the Mi 10 Ultra, the screen comes from China Star Optoelectronics, and the main camera CMOS comes from Omni Vision (Haowei). They all are domestic suppliers. And there is no drop in the parameters. The use of domestic components on the flagship machine is quite interesting. This is the correct way to support domestic suppliers.

In the beginning part of Xiaomi’s autobiography, ‘Going Forward”, Lei Jun was reflecting on his past experience and concluded that the most important one was ‘follow the trend’. Looking at Xiaomi’s 10 years at the present moment, it is indeed better than the most optimistic forecast at the time, because it has stepped on the two most important outlets of the past decade, namely smartphones and mobile Internet.

At the end of ‘Being Nowhere’, Lei Jun mentioned that ‘the personal computer Internet is the scale of 1 billion devices, the mobile Internet is the scale of 5 billion devices, and the super Internet is the scale of 50 billion devices.’

Lei Jun hopes that Xiaomi will always be the pig on the vent.

Source

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