Xiaomi, a Chinese firm founded in 2010, unveiled its new Mi-3 handset on September 5th, five days before Apple’s iPhone 5S launch, it’s first in China. Compared to Apple’s global revenues from smartphones in the last year of $80 billion, Xiaomi earned $2.1 billion in China, Hong Kong, and Taiwan, where Xiaomi phones are sold. In the Chinese 2013 second quarter, Xiaomi’s market share in China at 5% has surpassed Apple’s 4.8%.
Interestingly, however, Xiaomi views itself as a company taking more after companies like Amazon, rather than Apple. Unlike Apple’s newest phone, which sells for $860 in China, the Mi-3’s cost is around $330, and is sold exclusively online to lower its cost, and relies on selling services to its users similar to Amazon’s Kindle. Revenue comes as customers use the device, rather than from its initial purchase.
Xiaomi also benefits from Chinese regulations, similar to the benefits from regulation discussed for the automobile industry in Dunne’s book. Chinese government requires that smartphones in China run a restricted version of the Android operating system. Google’s app store, mail service, maps, and other features are banned, creating space for Xiaomi to sell replacement services without competition.