China, the world's largest mobile phone market, is approaching saturation, and all manufacturers need new growth points to keep sales. They have chosen to go out to sea, hoping to use the increase in overseas markets to make up for possible losses in the domestic market. Xiaomi is in the middle of it. The most active one.
The average altitude of the European continent is 340 meters, where most of the landforms are plains, the lowest continent in the world. But for the internationalized millet, it is a must-have highland.
According to data from the analyst firm Canalys, the rapid growth of China's smartphone market has ended. In 2017, China's smartphone shipments fell for the first time in the first quarter, with a 14% drop in the fourth quarter. The worst is this decline. It is still continuing. According to a report released by China Information and Communication Research Institute, China's smartphone shipments in the first three months of this year were 81.87 million units, a year-on-year decline of 26.1%.
The signal is already very obvious. China's largest mobile phone market in the world is approaching saturation. All TOP manufacturers need new growth points to keep sales. They have chosen to go out to sea, hoping to make up for the domestic market by increasing the overseas market. Loss, Xiaomi is one of the most active ones.
In the prospectus provided by Xiaomi to the Hong Kong Stock Exchange, overseas business is regarded as one of the three growth points of Xiaomi's future. Xiaomi also claimed in the previously issued CDR prospectus that 40% of the raised funds will be used for global business expansion. On July 8th, the day before Xiaomi's listing, Lei Jun also emphasized in the open letter the three paths that Xiaomi leads to a broader development space. Internationalization is one of them. 'The international market is vast and the sky is promising. The first quarter of Xiaomi International The proportion of the business in total revenue has reached 36%. To further promote internationalization, the income from international business as early as possible accounts for more than half of the total revenue. ' Lei Jun said.
For Lei Jun, Xiaomi changed the pattern and history of China's smart phone industry in eight years. It also created a legend in the capital world. In overseas markets, Xiaomi handed over a transcript with highlights, but still no. Less regret. Can Xiaomi, after the listing, turn international ambitions into reality?
Millet by red rice, red rice by India
India may be the most representative market in the process of internationalization of millet.
India, the world's second-largest population country, is a market that almost all Chinese manufacturers want to win. The Xiaomi prospectus shows that in 2015, 2016 and 2017, 6% of total rice revenue, 13.4% and 28% respectively came from Sales outside mainland China, of which India has the largest share of overseas markets.
However, Xiaomi's development in India was not smooth at the beginning. At the end of 2014, Xiaomi entered India, and in the second year, it encountered Ericsson's patent litigation. As a result, the low-end models using MediaTek chips were banned, and Xiaomi's sales in India were stagnant. In the year, it started to build mobile phones in India. In 2016, Xiaomi India began to recover. At that time, India also became a safe haven for Xiaomi. When the domestic market collapsed, the overseas business warmed up and the story of Xiaomi was not shattered. Going to the domestic market.
Xiaomi India's rebound encountered a perfect time difference, competing products OPPO and vivo just carried out a round of dealer adjustment, the channel has not been sorted out; and Huawei for the brand positioning considerations, at that time has not entered the Indian market. 'actually They (Huawei) believe that the products in the Indian market are relatively low-end, do not meet the high-end image of Huawei, and there is no progress. Later, they also use the glory (brand). 'An employee of OPPO overseas business department told China Entrepreneur. It seems that Huawei's internationalization has done its best, but not entering India is equivalent to giving this huge market to Xiaomi.
Different from the concerns of competing products, Xiaomi decisively copied its low-cost inflation strategy in China, focusing on the sales of “100 yuan machine” (100 US dollars), and the red rice mobile phone became the measuring machine of the Indian market. Type. In 2017, Xiaomi's mobile phone shipments returned to the top five in the world, with 91.41 million units shipped in the year, including more than 73 million red rice phones, accounting for over 80%, which also made Xiaomi stick to 'millet by red rice. ' s Mark.
During the recovery of Xiaomi India, the company's managing director, Manual Kurmar Jain, contributed a lot. He established the local corporate image of Xiaomi's research and development in India, and introduced the honorary chairman of Indian giant Tata Industries Rajan Tata is an investor in Xiaomi India. He also maintains good communication with Indian Prime Minister Modi’s office. Lei Jun met with Modi and Indian IT and the Finance Minister in early 2017 to benefit from his referral. After the meeting Xiaomi rushed all the way in the Indian market, eventually surpassing Samsung to become the No. 1 mobile phone brand in India, with a market share of 31.1% in the first quarter of 2018.
Tarun Pathak, deputy director of market research firm Counterpoint, said that in the process of Xiaomi's renaissance, the Indian market has played a huge role, providing mills with much-needed growth momentum. '2015-2016, millet's market share The sharp decline was the success of Red Rice 3 in India, which allowed the company to return blood. After that, Red Rice 4 helped it regain momentum and restore confidence to enter other emerging markets.
However, in India, not only Xiaomi, the domestic mobile phone market share in the Indian market is more than 50%, except Samsung is the Chinese brand in the top ten; OPPO and vivo are among the top three in most of the Southeast Asian market, even In the Indian market, Huawei's glory has also grown rapidly after entering the market; plus Xiaomi's sales in India, although the sales volume is leading, but the main sales models are red rice mobile phones, still do not make money or even lose money. After the listing of Xiaomi, Lei Jun undoubtedly needs to develop More new territories.
African Latin American door closed
Due to the size of the market, the level of purchasing power and consumption habits are close, the Latin American and African markets should be the second overseas key area after Xiaomi's India. Humi Barra, vice president of Xiaomi, also accepted the New York Times in December 2015. "The next focus of Xiaomi's overseas market is Africa, and it is also investing in Brazil. However, in the past two years, Xiaomi has not made breakthroughs in these markets. In terms of external calibre, the focus of internationalization has also become European market, not to mention the Latin American and African markets.
Because it tried both areas, it failed.
Although Africa has more than 1.2 billion people, its network infrastructure is very poor, and the number of smartphones is only about 100 million. Canalys data shows that the first mobile phone market in Africa is the Chinese mobile phone manufacturer, and the company’s three major brands have received With a 38% share, more than 90% of its mobile phones sold in Africa are feature machines rather than smartphones, which reflects the current state of mobile phone sales in Africa. Although the African market is undergoing a transition from a feature machine to a smartphone, there is The most popular model is still a hundred yuan function machine.
Counterpoint Research Director Yan Zhanmeng told China Entrepreneur that the channel cost in the African market is high. To build a low-cost mobile phone, it is only possible to build a factory in the local area. The logistics and security costs are high and require long-term operation. It is difficult for Internet companies to solve problems in the short term. The voice adopts the local R&D, production and sales methods. It has been deeply cultivated in Africa for many years, and the after-sales and logistics layout is perfect, so it can make money, but for Xiaomi, an 'outsider', it is a loss to do Africa. business.
'Even if the African smartphone market breaks out in the future, Huawei and ZTE are advanced.' An observer of the communications industry who asked for anonymity told China Entrepreneur that the two companies have stronger carrier relationships in Africa and have obvious channel advantages. Huawei is currently ranked third after Samsung in the African market.
Latin America also made Xiaomi unable to return. It is a territory belonging to Lenovo. For example, in Brazil, the largest market in Latin America, Motorola has gained more than 23%. Lenovo’s mobile phone employee told China Entrepreneur that Brazil’s business performance is very high. Strong, 'So Lenovo MBGROW's boss is Brazilian'. Counterpoint's data shows that in the first quarter of 2018, Latin American smartphone shipments accounted for nearly 90% of total mobile phone shipments, and smart phones have become the favorite machine for Latin American consumers. Motorola has a strong channel of carrier resources in Latin America. In 2017, its sales volume increased by 40%. In the first quarter of 2018, its market share exceeded 11%. It helped Lenovo become the second largest market share in Latin America.
Latin America and Africa can't get in. The US market is very repulsive to Chinese brands. Xiaomi wants to push internationalization further. Europe is the only remaining place. 'If you only say that you want to go to Europe to sell mobile phones, how much to sell at low prices? Taiwan is earning, then this is not international, 'An employee of the Huawei Terminal Marketing Department told the Chinese Entrepreneur, 'If you (Xiaomi) said to be international, then the highland of Europe must be taken down. . '
Attacking the European highlands
In 2017, Xiaomi’s turnaround in the Indian market and the company’s post-marketing needs provided a good reason for Lei’s determination to enter Europe.
According to the statistics of the research institute GFK, the average selling unit price (ASP) of smartphones in Western Europe market is 446.7 US dollars, which is the market with the highest consumption price except North America. European users are not sensitive to mobile phone prices because operators provide A lot of subsidies.
In the European mobile phone market, operators account for 50% of the channels, open markets (offline channels) account for 40%, and online markets (e-commerce) only 10%. Unlike the Chinese market, European users are more accustomed to buying carrier contract machines. Rather than buying bare metal in the e-commerce channel. Therefore, for every Chinese manufacturer who wants to enter the European market, the carrier relationship is a mountain that cannot be avoided.
On the day of Xiaomi's submission of the prospectus, Lei Jun went to Hong Kong to visit Li Ka-shing. The two sides reached a strategic cooperation. The Yangtze River Hutchison and Xiaomi, founded by Li Ka-shing, announced the formation of a global strategic alliance. The news was submerged in the report of Xiaomi's listing, but it is actually Xiaomi. One of the few advantages of entering Europe.
The business of the Yangtze River Hutchison includes the telecommunications field, and its overseas telecom assets are concentrated in Europe. The business is mainly carried out by its Three Mobile (3 Group). According to the agreement, the millet products will be in Austria, Denmark, Ireland, Italy, Sweden and the United Kingdom. The '3 Group' store was launched, with special priority arrangements for smartphones in Denmark, Ireland and Sweden.
However, the 3 Group only has operators in some European countries, and it is impossible for Xiaomi to enter all mainstream markets. These operators are generally ranked in the ranks of three or four, while the channels in Europe are mostly concentrated in the hands of the head operators. Too many benefits. At the same time, European operators have high standards for access. For example, red rice mobile phones are designed according to Chinese carrier standards, and may not be able to meet European standards immediately. This also requires long-term preparation.
At present, Xiaomi has only made breakthroughs in two open markets in Spain and France. According to data from Kantar Consumer Index (Kantar), two of the top 11 smartphones sold in Spain in the past six months are from Xiaomi. 6 from Huawei. With its long-standing good carrier relationship and continuous brand marketing, Huawei has more than 8% of the mainstream market in Europe, and even more than 30% in some regions. It has become the best in the European market. Brand.
Another threshold for entering Europe is the patent. Although Qualcomm is a shareholder of Xiaomi, Xiaomi also reached a patent license with Nokia in 2017, which cleared some obstacles for entering Europe, but it still faces the giant Ericsson in Europe.
Ericsson is the leading company in the European communications industry. It is responsible for the formulation of the European 5G standard and has great influence in Europe. The aforementioned observers told the "Chinese Entrepreneur" that Xiaomi's low-end models are based on MediaTek chips, 'Millet is currently (Europe) The sales volume is not high. If the future breaks through 5 million or 10 million (Taiwan), it is likely to face Ericsson's patent litigation' and eventually trigger the result of the ban.
In the Indian market, Xiaomi had a patent conflict with Ericsson. Later, it relied on the reverse authorization with Qualcomm to successfully escape the lock-up crisis. In addition, Xiaomi has encountered patent lawsuits from Coolpad and KPN, the largest telecommunications company in the Netherlands. Compared with competitors, Xiaomi's accumulation of patents does not seem to have advantages, and it is more likely to encounter patent attacks. Its R&D expenditure in 2017 was only 3.151 billion yuan, accounting for 2.75% of total revenue. The Huawei R&D expenditure in 2017 was 89.7 billion yuan, accounting for 15% of the total revenue.
Therefore, Xiaomi's current focus in Western Europe is on the Spanish, Greek and French markets, where the open channels are more open, and for Xiaomi, which has no operator resources, the sales resistance is even smaller. At the same time, consumers in these markets are more enthusiastic about low-cost mobile phones. Gao. IDC data shows that in the first quarter of this year, Xiaomi's market share in Greece was 24%, and its market share in Spain was 12%, ranking fourth.
In addition to operators and patent issues, another thorny factor that Xiaomi faces is the brand's weakness. Compared with Asian and African users, European users care more about brand and quality. Xiaomi's low-price strategy is not able to achieve a big breakthrough. European users It is also more traditional, Sony and LG and other traditional brands that are less common in China, but there is a good sales here. The accumulation of this brand is the shortage of Xiaomi.
Xiaomi's competing products in Europe sold 4 million mobile phones in 2017, 70% of which came from overseas markets. The average price of each mobile phone was 3,200 yuan. The latest one plus 6 mobile phones are positioned at the mid-to-high end of 500 euros. However, it sold 1 million units worldwide in 22 days. Although Xiaomi has also brought the high-end products of MIX series into Europe, the real price is still low-priced models such as red rice, and the price generally does not exceed 1,000 yuan. The current state of the low-end machine is like a double-edged sword. It helped Xiaomi get good data and also labeled Xiaomi with a 'low-end' label.
Wang Xiang, senior vice president of Xiaomi's global expansion, said that there are opportunities for development in Europe, because the competition in the local market is not fierce. However, Xiaomi has faced fierce competition from Chinese counterparts in several countries where Europe is focused. According to the Russian Satellite News Agency, In February 2018, Huawei and glory two brands of smartphones sold more than Apple in Russia for the first time, which is second only to Samsung, far beyond Xiaomi.
Lei Jun once said that Xiaomi was very anxious about internationalization three years ago. He opened seven markets and suffered very heavy losses. But forming a team to understand the situation of each country, including policy and competitive environment, no two or three years of gestation, want to enter quickly A country is almost impossible. Just don't know how hard this European battle is, and how long the capital market is willing to wait for millet.