Wang Bin, 29, is a serious “mi fan”, one of the ardent followers of Xiaomi Technology Co Ltd, the maker of smartphones and other electronic products that looks headed for a big initial public offering, perhaps as early as this year. Wang’s house is a Xiaomi temple. He has a Xiaomi television. Wears a Xiaomi watch. Has Xiaomi thermostats, air purifiers and smoke detectors. Xiaomi products help control the windows, doors and lights from an app on his Xiaomi smartphone.
The company, which started with smartphones but has since branched out into a plethora of smart devices, first gained a following in China by releasing limited batches of slick-looking phones to shoppers online at a lower price-tag than the likes of Apple. “Ordinary people can now experience things that were out of reach before, and this value has helped get these products into millions of family homes,” said Wang.
“Since the first Xiaomi smartphone came out I knew Xiaomi would change the world.” Wang needs no winning over. Still, Xiaomi - led by entrepreneur Lei Jun - will need many more loyal fans to live up to sky-high investor expectations. There are concerns over thin margins, a stalling Chinese smartphone market, costs of opening physical stores, and obstacles facing the brand to retain its followers and win new ones overseas, analysts who cover the company told Reuters.
HIT A WALL
Reuters reported last month that Xiaomi had tapped CLSA, Goldman Sachs and Morgan Stanley as sponsors for its proposed IPO, which could value the company at up to $100 billion and be the world’s biggest tech float this year.
“Looking from the outside in, that $100 billion number sounds feasible, you can do the math and say it’s possible,” said Hans Tung, a managing partner at GGV Capital, who was an early investor in Xiaomi and is a former board member. A lot will depend on the major strategy shift Xiaomi is driving with its “internet of things” smart products and services as well as its opening of physical stores. It’s also pushing hard in key markets like India and Southeast Asia.
Xiaomi, founded in 2010, started with an online-only strategy that helped it become if briefly, the world’s most valuable start-up. CEO Lei Jun developed a cult status akin to the late Apple founder Steve Jobs. But its online model eventually hit a wall. Xiaomi’s phones dropped out of the top five in China in 2016 because of rising competition from local rivals Huawei, Oppo and Vivo.
The slump forced the company to pull back from several overseas markets in 2016, and to shift towards physical stores and developing artificial intelligence and internet services as new areas of growth. Last year Lei said the “worst was over” and the firm blew past its 100 billion yuan sales target for 2017 with a couple of months to spare.
