China's Xiaomi won't sell phones right away but plans e-commerce site for US

Technology Associated Press

Xiaomi, one of China's hottest companies, is bringing its blend of cheap yet fashionable technology and crowd-pleasing antics to the U.S.

Continue Reading Below

While its smartphones won't be available here anytime soon, Xiaomi unveiled plans Thursday to test the U.S. market by selling inexpensive headphones and other accessories online, hewing to the Internet-driven, customer-friendly model that has helped turned the company into a major player in mobile computing just five years after its founding.

Xiaomi — pronounced schow-mee — has made a name in China by selling sleek gadgets at relatively low prices, using online sales and social media to keep marketing and distribution costs low. Some analysts have hailed the company as the Chinese equivalent of Apple, in part because of its intensely loyal fans.

There are some significant differences between the two companies' approach, though. While Apple tends to keep its future product plans secret, Xiaomi has rocketed to the top of the Chinese market by inviting customers to nosh on popcorn at company parties, chat on Xiaomi's online forums and review or make suggestions for new features, which Xiaomi frequently builds into its weekly software updates.

"We don't have customers or users. They prefer to be addressed (as) fans," said Hugo Barra, a former Google executive and now a top official at Xiaomi.

Xiaomi has emerged as a mobile-computing sensation with a line of smartphones sold in China, India and seven other countries where much of the population still lacks Internet access. The phones offer a smattering of the sleek technology featured in fancier devices made by Apple and Samsung, but they sell at much lower prices, ranging from about $95 to $280.

Continue Reading Below

"It may not be the best product out there but a product with the best combination: a very affordable price and good quality," says Bing-Sheng Teng, a corporate strategy expert at the Cheung Kong Graduate School of Business in Beijing.

The formula is working so well that Xiaomi often draws comparisons to Apple, whose 2007 release of the iPhone triggered a cultural revolution. While the iPhone still dominates the smaller luxury segment of China's market, Xiaomi's devices are being snapped up by the masses almost as quickly as the company starts accepting online orders.

Xiaomi sold about 61 million phones last year, more than tripling its 2013 volume, Bin said. That established Xiaomi as China's top seller of smartphones with a 15 percent market share to edge out Samsung Electronics at 14 percent, according to research firm IHS. But another firm, Canalys, estimates that Apple sold more phones in China than either of those companies in the fourth quarter of 2014, when Apple's new iPhone 6 models came out.

By concentrating on online sales of phones and accessories, Bin added, the company has built the third-largest e-commerce site in China. Besides phones, Xiaomi has an electronics lineup that ranges from a 49-inch flat-panel TV for $550 to a fitness band for less than $20. The company also sells a stuffed bunny that serves as Xiaomi's mascot. About 2 million of the bunnies have been bought so far, according to Xiaomi.

But executives acknowledged the company faces big hurdles to entering the U.S. market, where most consumers buy smartphones from wireless carriers at subsidized prices. That could make Xiaomi's low-margin business model less effective here.

In addition, Xiamo has been accused of copying — or at least closely imitating — some designs from Apple or other companies. Executives took pains Thursday to stress an array of software and features that Xiaomi has developed on its own, to run on top of the Android operating system that Google makes available for other device- makers to use. When asked if such accusations could deter Xiaomi from selling phones in the United States, for fear of patent lawsuits, Bin said that's not a major issue for his company.

Xiaomi raised $1.1 billion late last year in an investment that valued the privately held company at $45 billion. The lofty appraisal came less than five years after Xiaomi's inception. The company's eight founders include: CEO Jun Lei, one of China's best-known technology entrepreneurs; Bin Lin, a former engineer at Microsoft and Google; and former Motorola executive Guangping Zhou.

Barra defected from his previous job overseeing Google's Android products in 2013 to help plot Xiaomi's expansion into markets outside China.

___

Associated Press writer Joe McDonald in Beijing contributed to this story.