Dialing Into Success

　　Moments after Lei Jun finished his keynoteaddress at the Global Mobile Internet Conference(GMIC) in Beijing in May，the CEO of Chinese smartphonemaker Xiaomi was mobbed by young volunteersworking the event， all eager to take pictures ofthe mop-haired 43-year-old and claim an autographof their hero.

　　Since that May conference， Xiaomi’s rock-starstatus in China， spearheaded by Lei， has grownexponentially. Founded in 2010 by a team ofseven experienced tech entrepreneurs led by Lei，the Beijing-based company’s cut-rate， high-specphones have gained a cult following. Online productlaunches sell out in minutes and analysts are gushingabout a recent $10 billion valuation， with $4billion revenue expected in 2013 and expected salesof 20 million phones. In the second quarter， Xiaomisurpassed Apple to control 5 percent of China’slucrative smartphone market， the world’s largest，expected to grow to 360 million shipments by 2013，according to global marketing consultants IDC.

　　The right price

　　Where Android powered Xiaomi has excelled is incatering to China’s acutely price-sensitive consumers.

　　Its current phones， the more advancedof which stack up favorably against Samsung’sGalaxy Series， are priced between 799-1，799 yuan($128-290)， compared to at least 4，000 yuan ($645)for high-end models from Samsung and Apple. InSeptember， Apple’s vaunted launch of a 4，488yuan ($724) “budget” model， the 5C， wasmet with only tepid fanfare in the Chinesemarket. According to China Daily， datafrom China’s online commerce giantAlibaba in 2013 shows that 61 percentof mobile phones sold on its popularTaobao marketplace and the Tmall.complatform were priced below $165， 20percent cost $165 to $330， and only 18percent cost more than $330.

　　“Marketing has been Xiaomi’s realwinner，” said Calvin Smith， Director ofInternational Relations at the Great WallClub， a mobile Internet networking andadvisory firm that hosted the GMICconference.

　　“They have absolutely rabid fans. They gainedthis through creating a sense of pride in both thecompany and the users. Xiaomi is the underdog， itsbuyers are underdogs in society - they are individualsin a society where everything is a fight unlessyou’re at the top. Xiaomi has done a brilliant job ofweaving that message into its marketing.”

　　Matt Cheung， a Hong Kong born attorney withexperience working in a Beijing law firm， purchaseda MI2 smartphone 10 months ago. Like other Xiaomiusers， Cheung was looking for a balance betweenprice and performance and found a fit with theXiaomi phone. He admits it’s less flashy than aniPhone or top-model Samsung， but said he’s satisfiedso far.

　　“I think Xiaomi has similar， or the samecapabilities as other high-end phones suchas iPhones and Samsung Galaxies. It hasa good camera， a lot of apps， and bestof all you can customize your phone likehow you do with your computer such aswallpaper and themes，” Cheung said.

　　Big challenges

　　With the release of its newest model，the MI3 in mid-October， and the imminentopening of its first flagship store， inBeijing’s upmarket Wangjing Mall， Xiaomihas attracted a crush of recent mediacoverage. Analysts’ chatter has centeredaround the move of Google’s former VP ofProduct Management for Android joining Xiaomi inOctober， to lead company’s global expansion.Lydia Bi， a research analyst at market researchand advisory company Canalys， said hiring HugoBarra means Xiaomi is definitely eyeing the internationalmarket， although the company is not yetin a position to roll out its devices on a big scaleinternationally. She said issues of gaining trust fromoverseas buyers， differentiating itself from existingsmartphones， and navigating international intellectualproperty issues were challenges for the Xiaomibrand.

　　At the September 5 launch for the newest MI3(starting at $330) and a low-priced Smart-TV ($490)also released in mid-October， Barra reportedly toldthe Beijing audience， “I believe it is time for theworld to know about Xiaomi.”Currently， Xiaomi sellsits phones through its exclusive online store in theChinese mainland， Hong Kong and Taiwan.

　　“It is totally feasible [for Xiaomi to globalize]，”said Mark Tanner， Managing Directorof Shanghai-based ChinaSkinny， a market advisoryfirm. “I’d say they will beespecially huge in themost price-sensitivemarkets of Asia， Africaand Latin America，however they will stilldo well in the developedmarkets， withthe United States being the toughestmarket for them.”

　　Tanner acknowledges that barriersdo exist， however. “Their thorniestbarrier will be the negative perceptionaround China， for both qualityand， more likely， Big Brother [Governmentoversight]. The U.S. obviouslyhas a lot of paranoia about Chineseproducts - just look at the barriersHuawei has faced there.”

　　Beyond the stigmas that manyin the West attach to companiescoming out of China， Xiaomi facesanother， persistent， criticism： its tendencyto model itself after， or even“copy” Apple.

　　Apple clone？

　　The similarities begin with the company’sboyishly handsome CEO， LeiJun， who Forbes ranks as the 55thrichest person in China with a networth of $1.75 billion. Although Lei has recentlyshunned away the comparisons between his companyand Apple， he often appears publicly in jeansand dark shirts， a la Steve Jobs. The company’s rockconcert styled product launches and interior décorof its new flagship store are no doubt influenced byApple， and Xiaomi phones， although Android-based，share some user-interface features with the moreexpensive iPhones.

　　Stijn Schuermans， senior analyst at VisonMobile，a London-based mobile research firm， who has writtenabout Xiaomi’s market emergence， thinks thatthe Apple comparisons are misguided.

　　“Yes， in the beginning， Xiaomi styled itself afterApple， but as time has passed， Xiaomi looks lessand less like Apple， and more and more like Xiaomi，”Schuermans said.

　　“Lei Jun was smart. He recognized the culturaldominance of Apple at the time in China， piggybackedon some of that culture to gain recognition，and now has transformed it into his own brand.”Smith shares this perspective.

　　“Is Lei Jun the Chinese version of Steve Jobs？No， but there is one place they share traits. It’s nothardware， it’s marketing. He has created a brand andpersona with cult-like following by tapping into theemotions of the consumer.”

　　As Xiaomi’s star rises and media coveragemounts， it is the phone maker’s ability to tug onthese emotions， and keep its user base excited， thatwill ultimately determine its survival.