Date
17 September 2019
Xiaomi’s Lei Jun suggested a wager in 2013 that his firm’s revenue would surpass that of Gree Electric in five years, a challenge that was accepted by the latter’s chairwoman Dong Mingzhu (inset). Photos: Reuters, Yahoo
Xiaomi’s Lei Jun suggested a wager in 2013 that his firm’s revenue would surpass that of Gree Electric in five years, a challenge that was accepted by the latter’s chairwoman Dong Mingzhu (inset). Photos: Reuters, Yahoo

Xiaomi, Gree face off in smart home appliances battle

There were two high-profile bets among Chinese business tycoons in recent years. One was a 100 million yuan bet between Alibaba founder Jack Ma and Wang Jianlin, head of Dalian Wanda Group. By 2020, if online consumption has surpassed 50 percent of total retail volume, Wang said he would give Ma 100 million yuan or vice versa.

China’s online retail sales reached 9 trillion yuan last year, accounting for 23.6 percent of the nation’s total 38.1 trillion yuan of retail sales. That marks a big jump from 6.2 percent in 2012. However, it seems the share of online retail sales is unlikely to hit the 50 percent mark next year.

Another bet is between Lei Jun, chief executive of Chinese smartphone maker Xiaomi and Gree Electric chairwoman Dong Mingzhu.

The wager between Xiaomi and Gree dates back to December 12, 2013, when the two high-profile entrepreneurs were both named “people of economic achievement of the year” by CCTV. At the time, Lei claimed that Xiaomi’s revenue would surpass that of Gree in five years, and suggested a bet of one yuan.

Dong immediately accepted the challenge, but lifted the stake to 1 billion yuan.

Back then, Gree was already one of the nation’s top three home appliance manufacturers with annual sales revenue of 120 billion yuan. By contrast, Xiaomi’s revenue was only 30 billion yuan, less than one third of Gree’s.

Over past five years, Lei has managed to boost Xiaomi’s revenue by nearly five times. Xiaomi reported revenue of 174.9 billion yuan last year, but that still lags behind Gree’s 210 billion yuan.

When asked about the bet Wednesday, Lei joked that Dong had already contacted him.

Dong revealed late last year that she would donate that 1 billion yuan to charity if Lei paid her.

Aside from the bet, a lot more is at stake as the two companies are facing off each other as they have both set sight on the fast-growing smart home appliance market.

Xiaomi has leveraged on its popular low-cost smartphones to tap into the smart appliance market, and its ultimate goal is to build a massive ecosystem using Internet of Things to connect TVs, air conditioners, refrigerators, washing machines, etc.

Meanwhile, Gree is grappling with saturating traditional home appliances market and trying to look for new growth points, smart home appliances being one of them.

China’s smart home appliance market was worth 325.5 billion yuan last year, and the market is expected to zoom to 1.5 trillion yuan by 2025, according to a report released by iResearch.

This article appeared in the Hong Kong Economic Journal on March 20

Translation by Julie Zhu

[Chinese version 中文版]

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RC

Hong Kong Economic Journal columnist