Date
23 October 2019
Xiaomi is pursuing a multi-brand strategy to expand its market reach. Photo: Reuters
Xiaomi is pursuing a multi-brand strategy to expand its market reach. Photo: Reuters

Will the Redmi K20 Pro help Xiaomi catch up with Huawei?

Xiaomi was China’s largest smartphone maker at one point in time in the past, establishing its presence before other domestic brands such as Oppo, Vivo and Huawei entered the market. But the company failed to retain the lead, giving way to the rivals and becoming just one among the contenders.

A key reason why Xiaomi, which is headquartered in Beijing, fell back was because it didn’t scale up its manufacturing capacity properly to ensure optimum supply to the market. The company’s fortunes improved recently, yet it still has a long way to go before it can catch up with the current No.1 Chinese player, Huawei.

The prospects, however, suddenly seem brighter now as rival Huawei is facing a potential major disruption to its business in the wake of supplier and partner troubles.    

As Huawei is in a fire-fighting mode in the wake of US sanctions, which prompted entities such as Android developer Google and chipmaker ARM to cut business ties with the Chinese telecom gear maker, Xiaomi has the opportunity to close in on its bigger domestic competitor. 

There is no better time to fight back than now, a fact that Xiaomi seems to be well aware of, judging from the firm’s latest product initiatives.  

On Tuesday, Xiaomi unveiled its latest flagship smartphone, the Redmi K20 Pro, touting it as the new “flagship killer”. The device comes with the latest Qualcomm Snapdragon 855 processor and is equipped with a 48-megapixel camera and 6.39-inch full HD color display.

In order to provide notchless display, the new gadget bears a retractable front 20-megapixel camera, similar to those in Oppo and OnePlus smartphones, observers have noted.

What is really interesting that the new phone won’t cost a lot despite the top of the line specs. With prices starting from 2,599 yuan to 2,999 yuan, the Redmi K20 Pro can be considered the cheapest smartphone model with Snapdragon 855 mobile platform.

Huawei has been leading the China smartphone market in the past few years by leveraging a multi-brand strategy. The company sells through two brands, Huawei and Honor, targeting different market segments.

Xiaomi is also adopting similar strategy with its Mi and Redmi brands. However, as the brands have little differentiation, consumers mostly make their purchase decisions based on the price factor. The lower priced Redmi devices have been the best-sellers among Xiaomi smartphones, while the flagship series such as Mi 9 and Mi MIx 3 attract a small group of diehard Mi fans.

Redmi announced on Tuesday that its Redmi Note 7 smartphone, the first product under the new Redmi brand, has sold more than 10 million units so far globally. The company has successfully explored a new way to boost sales under the two-brand strategy.

Redmi is now serving the mass-market with whole range of products from entry level to premium level. Given its affordable pricing, the new Redmi K20 Pro can be seen as a premium flagship smartphone for the mass market.

Mi, meanwhile, is tipped to become an upmarket brand for products priced over 4,000 yuan. With the new strategy, Xiaomi will have greater flexibility to operate the two brands and expand the market reach, rather than see the two cannibalize each other and cause Xiaomi to lose overall market share.

Prior to the launch of the K20 series smartphones, general manager Lu Weibing explained the reason why Redmi should launch a flagship series. Redmi is positioned as a complete ecosystem that covers a range of products, from entry level 1,000 yuan smartphones and low-profit-margin phones as well as other devices, the executive said.

But the key point is that Redmi has assumed old Mi brand philosophy of chasing the best price for the best products.

The launch of K20 Pro could prove the last piece of puzzle in relation to the transformation of Redmi. Lu noted that Redmi needs to squeeze out all unnecessary profit margin and lower the price as much as possible to make a flagship phone more affordable.

According to Redmi, the profit for premium flagships has been rising in the past few years, but there is a problem as more mid-tier smartphones were being sold at high prices under the guise of flagship devices. That’s not seen as a sustainable business model. Lu said his firm will continue to focus the growth of Redmi brand in all segments to improve customer experiences.

The Huawei woes no doubt offer the best opportunity for Xiaomi to catch up with its bigger Chinese rival in the global smartphone market. The low price ‘flagship killer’ K20 Pro can play a key role in boosting Xiaomi’s international smartphone shipments in the coming quarters.

In the first quarter, Xiaomi shipped around 28 million smartphones globally, putting it in the 4th rank. Redmi Note 7 sold more than 10 million units globally, accounting for a third of the firm’s global shipment.

If Xioami fully resolves problems in its supply chain, there is no reason why it shouldn’t be able to catch up with Huawei on shipments, especially given the prospect that customers in the West may now want to avoid Huawei products.

– Contact us at [email protected]

RC

EJ Insight writer