Xiaomi's Mi Notebook Air Could Disrupt the Laptop Market

By Markets Fool.com

Chinese smartphone giant Xiaomi recently launched the Mi Notebook Air, a Windows 10 ultrabook that bears a striking resemblance to Apple's (NASDAQ: AAPL) MacBook Air. However, the device is much cheaper and more powerful than Apple's laptop.

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The $750 device sports an Intel (NASDAQ: INTC) Core i5-6200 processor, aNvidia (NASDAQ: NVDA) GeForce 940MX for solid mid-range gaming, 8GB of RAM, a 256GB SSD, and a 13.3-inch full HD screen. Although the Mi Notebook Air is branded as a Xiaomi device, it was actually manufactured by its partner Tian Mi.

The Mi Notebook. Image source: Xiaomi.

By comparison, a 13-inch MacBook Air with a 256GB SSD costs $1,199, has a comparable processor, the same amount of RAM, and a much weaker integrated graphics card. Both devices run for about nine hours on a single charge. A cheaper 12.5-inch version of the Mi Notebook Air costs $530, but it sports a weaker Intel Core M processor, 4GB of RAM, a 128GB SSD, and relies on integrated graphics instead of a Nvidia GPU.

But how does it fare against Windows gaming laptops?

Beating Apple's MacBook Air in price comparisons isn't tough, but the Mi Notebook Air also crushes most Windows gaming laptops. HP's (NYSE: HPQ) cheapest gaming laptop, the $900 15.6inch HP Omen, sports an Intel Core i7 CPU, a Nvidia GeForce GTX 950M, and 8GB of RAM -- but it usesa slower 1TB HDD instead of an SSD while its battery only lasts about five hours. Moreover, the Omen is a massive 5-pound laptop, while the Mi Notebook Air weighs just 2.8 pounds.

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The only comparable "gaming ultrabook" on the market is Lenovo's Air 13 Pro, which offers nearly identical hardware as the Mi Notebook Air but just half as much RAM (4GB) for $750. Asus' ZenBook UX303UB has the same 940MX GPU, a beefier i7 processor, 12GB or RAM, and a 512GB SSD -- but itcosts $1,200.

The Mi Notebook Air's only real rival, Lenovo's Air 13 Pro. Image source: Lenovo.

Based on those comparisons, it seems like Windows gaming laptop makers could find it tough to match Xiaomi's hardware specs at comparable prices. But that shouldn't be surprising, since Xiaomi has already executed the same low-margin strategy across multiple markets.

The latest in a long streak of disruptions

Xiaomi's business strategy is simple -- to install high-end hardware in its devices, accept lower margins than established competitors, sell most of its devices online to avoid brick-and-mortar markups, and rely on word-of-mouth or social media marketing campaigns to keep expenses low.

In addition to finishing last year as the fifth-largest smartphone maker in the world, Xiaomi also became the second-largest wearables makerin the world after Fitbit (NYSE: FIT) with cheap fitness trackers that cost as little as $15. It also sells 4K smart TVs that cost about half as much as market leader Samsung's, and its new 4K Mi Drone costs a fraction of the price of DJI Innovations' popular Phantom drones. Xiaomi also sells Yi Technology's action cameras -- which offer the same hardware as GoPro's (NASDAQ: GPRO) cameras for much lower prices -- through its online store. Therefore, disrupting the laptop market with a low-cost gaming ultrabook seems like a natural next step for Xiaomi.

Xiaomi is expanding into these new markets because sales of its smartphones rose just 5% annually last year dueto rising competition amid waning demand in China. By expanding its portfolio with new devices, Xiaomi can reduce the weight of its smartphone business while finding new ways to expand its digital ecosystem -- which include the Mi Store, games, apps, and partnerships with various O2O (online to offline) services.

But Xiaomi could face an uphill battle

Xiaomi's Mi Notebook Air is an impressive-looking device, but the company could struggle to get consumers interested in laptops again. The ultrabook will initially only be available in China, but IDC expects the country's PC market to contract 10.4% this year, compared to projected declines of 7.7% and 9.3% for the U.S. andworldwide markets, respectively. Simply put, the PC market isn't as fertile for disruption as the smartphone, wearable, and drone markets were when Xiaomi entered them.

If Xiaomi struggles to sell the Mi Notebook Air within China -- theworld's biggest PC market since 2011 -- it might think twice before launching it in other markets. That could make it much easier for Lenovo, the biggest PC maker in the world, todominate the niche market for low-cost gaming ultrabooks.

But even if Xiaomi doesn't sell enough Mi Notebooks to gain market share against the PC market leaders, other PC vendors could mimic Xiaomi's strategy -- which could lead to a pricing war in gaming ultrabooks that would hurt margins across the entire industry.

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Leo Sun has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Apple, GoPro, and Nvidia. The Motley Fool has the following options: long January 2018 $90 calls on Apple and short January 2018 $95 calls on Apple. The Motley Fool recommends Fitbit and Intel. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.