24 March 2019
Xiaomi is determined to tap the Korean market in a bid to boost its overseas exposure. Photo: Bloomberg
Xiaomi is determined to tap the Korean market in a bid to boost its overseas exposure. Photo: Bloomberg

Xiaomi eyes Korea expansion as share price rebounds

Following its weak trading debut last week, Chinese smartphone maker Xiaomi has seen its share price rise above its offer price.

This came after the Hong Kong stock exchange and its mainland counterparts agreed to form a work group to allow Chinese investors to invest in stocks with weighted voting structure like Xiaomi, raising local investors’ expectations that the shares could rise further amid fresh money from the north.

Of course, the trading arrangement between the Hong Kong and mainland bourses does not specifically refer to Xiaomi. The Chinese technology firm can only focus on its business to drive its earnings growth and thereby support its extremely high valuation.

On Monday, Xiaomi launched its smartphone products in South Korea in partnership with SK Telecom and KT.

Xiaomi introduced its entry-level flagship Redmi Note 5 in order to test the waters in a market dominated by Samsung Electronics, LG Mobile and Apple. The big three accounted for almost all of the smartphone sales in the market.

The Redmi Note 5 is officially priced at 299,200 won (US$265) as a standalone purchase. However, with subsidies that come with certain mobile data plans offered by SKT and KT, the price could drop to below 100,000 won.

The handset is also available for purchase at Lotte’s electronics store chain Hi-Mart and CJ Hellovision.

It seems that Xiaomi is determined to tap the Korean market in a bid to boost its overseas exposure. It will definitely be an uphill struggle for the Chinese company in the wake of the strong connections that Samsung and LG have with local retailers and operators. It would even be more difficult for Xiaomi if the local players offer much more subsidies to retain their customers.

Some market observers warn that Korea is a graveyard for non-local smartphone makers: many foreign brands such as Huawei, Motorola and Sony have suffered a lot in their effort to grab a slice of the Korean market.

However, Xiaomi appears to be taking a different route. To build its brand awareness, the company is introducing not a smartphone but a portable battery charger.

Xiaomi has long been known for its cheap but high-quality chargers. They have been popular in many overseas markets due to their high price-function ratio. It is said that Xiaomi now accounts for more than 80 percent of the Korean portable battery charger market.

In fact, many Koreans have the impression that Xiaomi stands for portable battery charger. Such a strong brand awareness has helped Xiaomi a lot in selling its first handset in the market.

But Xiaomi is also taking a big risk by focusing on an entry-level smartphone, rather than launching a flagship model, to serve Korean customers, who are heavy users of mobile devices.

One of the main reasons why Koreans sniff at Redmi Note 5 is the fact that it doesn’t have near-field communication (NFC) feature. The technology allows users to pay by swiping their phone in front of the server.

Redmi Note 5 doesn’t offer a mobile payment feature like Samsung Pay or LG Pay. So for Korean consumers who are used to having phones with payment functions, the Xiaomi model is not a good choice.

A Korean analyst said the Redmi phone would cause inconvenience to Koreans, who use the NFC function in their daily activities such as paying for a cup of coffee or riding on a subway train.

While cheap pricing is always a key factor for new brand like Xiaomi to gain ground in a new market, smartphone users will pay more attention to the product’s software and user interface on top of the product’s cost.

Xiaomi’s customized MIUI interface based on Google’s Android could be another factor affecting Xiaomi debut in Korea. Market observers said the MIUI may be popular among Chinese users as the company has massive resources to regularly update the software to meet the latest Android development. But MIUI’s global edition may not have as many regular updates as its Chinese version. Korean consumers may face update issues.

Still, Xiaomi is keen on boosting its overseas revenue to more than half of its total sales in a bid to reduce its reliance on the home market, as well as to tap fast-growing emerging markets such India, where Xiaomi is the top smartphone brand with 31.1 percent market share.

But it’s interesting to see whether Xiaomi can replicate its Indian success in a mature market like Korea.

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EJ Insight writer

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