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Deal with Microsoft notwithstanding, China’s Xiaomi won't be stateside anytime soon

Matt Hamblen | June 3, 2016
Marketing and branding must be Xiaomi’s priorities, analysts say.

Barra has recently said in interviews that the U.S. market is "on the radar" for Xiaomi, but not in 2016. Analysts have been parsing his comments carefully, but most aren't optimistic about the company's prospects in the U.S., partly because of the stiff competition offered by Apple and Samsung, as well as by Chinese companies already in the U.S., like ZTE and TCL.

"Xiaomi's had an eye on coming to the U.S. and Western Europe where there's a seemingly untapped potential for smartphone growth," said Jack Narcotta, an analyst at TBR, in an interview. "It's a big hill they have in front of them with the U.S. in particular. The marketing question is a really big challenge for them."

Patrick Moorhead, an analyst at Moor Insights & Strategy, agreed. "American consumers need unique marketing directly tailored to them that knocks them off their pattern of buying Apple, Samsung and LG," he said. "Most Americans have never heard of Xiaomi and the company would need to invest in some serious brand-building to move the needle. It's not impossible to do this, just difficult and expensive."

In the U.S. market, Xiaomi faces Apple and Samsung for premium smartphones with prices above $600 (without carrier subsidy). But Xiaomi has offered its smartphones in other countries for $200 to $300 (without subsidy), putting it more in direct competition with phones from ZTE and Huawei, analysts said.

Generally, Xiaomi phones have premium features and styling, but have sold at lower prices partly because the company has circumvented the more expensive wireless carrier sales channel, analysts said.

In China and other markets, Xiaomi has relied heavily on online sales, but has also successfully paired its products with the ability to purchase apps and services for features like chat or multimedia that are harder to obtain than in the U.S., partly because Google services, among others, are blocked by the government in China, TBR's Narcotta noted.

"The Xiaomi business model works only in China where Google is blocked by the Chinese, but as soon as that advantage goes away in other countries, what do you have with a Xiaomi phone that isn't that different from a Samsung phone, but a little cheaper?" Narcotta said.

"The U.S. carriers, I'm sure, want an alternative to Samsung and Apple devices, but it doesn't serve Xiaomi's needs to get de-prioritized on the brand side like a ZTE or a Kyocera," Moorhead added.

"In the U.S., people are much more comfortable going into a shop to buy a phone," added Tuong Nguyen, a Gartner analyst. Also, other Chinese companies are pushing to break into the U.S. market due to the recent slowdown of smartphone sales in China.

 

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