Date
12 December 2018
It makes sense for Meitu to focus on software where it excels, and leave the hardware operation to Xiaomi, under a smartphone cooperation deal. Photo: Bloomberg
It makes sense for Meitu to focus on software where it excels, and leave the hardware operation to Xiaomi, under a smartphone cooperation deal. Photo: Bloomberg

Why Xiaomi-Meitu partnership should be a win-win

Xiaomi has signed a long-term exclusive cooperation deal with Chinese selfie app developer Meitu. 

Phones made under the deal will carry the Meitu brand, but Xiaomi will be responsible for design, R&D and sales. Meitu, on its part, will be mainly involved in camera software.

The pair’s cooperation deal will last up to 30 years. Meitu will be entitled to 10 percent of the gross profit of each smartphone with Meitu brand. After reaching certain threshold, Meitu will get a fixed fee for each smartphone, with a minimum guaranteed amount of US$10 million a year.

Xiaomi said the cooperation is aimed at expanding its women customer base.

This should create a win-win situation for both parties.

Meitu is known for its beautification app, but hardware is not its expertise and the business is deteriorating.

The firm’s first-half revenue from its hardware business dropped 23 percent to 1.48 billion yuan from the year before. The number of units sold was down 37 percent from the year before.

By contrast, Xiaomi shipped 34.4 million smartphones in the third quarter, ranking fourth globally.

It’s better for Meitu to focus on software where it excels and receive a cut from Xiaomi for each device sold.

The smartphone market has becoming increasingly competitive. Different brands have almost identical features on aspects like screen size, design and speed. Photo-taking might be one of very few areas each brand can still differentiate from rival products.

Apple’s iPhone is known for its picture quality. Huawei has introduced the world’s first Leica triple camera into its P20 model.

For Xiaomi to vie with them, Meitu’s app might be the answer.

Meitu has accumulated massive data as the owner of the world’s most-used photo-editing software. It knows the trick as to how to make women look more attractive in the selfies.

This article appeared in the Hong Kong Economic Journal on Nov 21

Translation by Julie Zhu

[Chinese version 中文版]

– Contact us at [email protected]

RC

Hong Kong Economic Journal columnist

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