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Xiaomi makes India gains on broader growth drive

Xiaomi, the Chinese smartphone maker, said that its revenues in India had exceeded $1bn last year as it looks abroad for growth amid continuing competitive pressures at home.

Chinese-owned technology companies have so far led the smartphone market in India. The subcontinent is seen as the next big untapped market for mobile makers at a time when growth has begun to flag elsewhere.

Sales of Xiaomi’s smartphones in the country more than doubled from 3m to about 6.5m, Shou Zi Chew, its chief financial officer, told the Financial Times in an interview.

“What this [$1bn] milestone shows is we have successfully stepped out of China into the global arena,” he said at the Consumer Electronics Show in Las Vegas, where Xiaomi is exhibiting for the first time.

“2016 was a watershed year for us as we truly became an international company.”

Xiaomi is among the top three smartphone companies by sales in India, alongside Huawei and Lenovo’s Motorola.

To achieve that in just a couple of years, Xiaomi “replicated our Chinese strategy” of focusing on online sales and an ecosystem of companion products, championed by a passionate community of what it calls “Mi fans” instead of traditional advertising, Mr Chew said.

However, after a period of breakneck growth leading up to 2015, Xiaomi has struggled to maintain momentum in China in the past two years, losing its position at the top of the world’s largest mobile market to local rivals such as Oppo and Vivo.

Mr Chew would not say whether Xiaomi’s global sales grew last year, after it missed its revenue targets in 2015.

“The company has grown in a way we wanted it to grow . . . where we want it to grow,” he said. Instead of prioritising growth or market share gains at any cost, Xiaomi has focused on increasing efficiencies in its online sales and distribution and developing its “ecosystem” of companion Mi products.

What this [$1bn] milestone shows is we have successfully stepped out of China into the global arena

These range from internet-connected air purifiers and rice cookers to its wildly popular Mi Band fitness tracker, which has sold more than 23m units.

Xiaomi focuses on smartphones, TV sets, wireless routers and laptops, while it has invested in or supported 77 start-ups which together have sold more than 50m connected devices that tie into its central Mi Home app. A handful of these Mi ecosystem companies have exceeded Rmb1bn in sales, he said.

Many of those companion devices are on show at CES, where Xiaomi unveiled an ultra-thin TV set.

After its early success in India, Mr Chew said that Xiaomi was now increasingly confident that it could take its operating model, which he likened to a blend of Japanese homewares brand Muji and US discount retailer Costco for its combination of affordable quality and ultra efficiency, to other countries, including “the key big emerging market countries, Europe and the US”.

“The US is an important market for us,” he said. “We want to enter in the right way.”

Shou Zi Chew, Xiaomi chief financial officer © Bloomberg

So far, Chinese handset makers have largely struggled to gain meaningful distribution and sales in the US, where Apple and Samsung dominate.

Mr Chew joined Xiaomi in mid-2015 from Yuri Milner’s DST Global, a significant investor in the seven-year-old Chinese company.

Xiaomi raised $1.1bn at a valuation of $45bn in late 2014, making it one of the world’s most valuable private tech companies.

At the end of 2015, as sales began to wane in China, Xiaomi determined that “blind growth is dangerous”, he said. “We will always pursue the highest quality, the most cost efficient channels and return the cost savings to consumers. That is the way we have chosen to grow in 2016.”

Despite not raising new capital for more than two years, Mr Chew said “we don’t need to” raise more funds. “There is no reason to believe we are not profitable,” he said.

Via FT