China’s answer to Steve Jobs grows his empire on geek chic

Lei Jun, the founder and chief executive of Xiaomi, China's hottest technology company, which is worth nearly €7.5 billion, is routinely described as the country's answer to the late Apple founder Steve Jobs.

While Xiaomi (pronounced shiao-me) is a name with which few consumers outside Asia are familiar – and one that few outside Asia are able to even pronounce – that may be about to change.

Lei likes his Jobs-style soundbites, and dons the occasional black shirt – a polo, not a Jobs-style turtleneck – but Xiaomi and Lei are very Chinese and very unlike Apple.

He hates the Apple analogies, believing Xiaomi’s business model resembles Amazon’s more closely, for example in the way the online retailer sells Kindles cheaply in order to boost its e-book sales.

The Chinese company’s success invite some comparisons with its western tech counterparts, however. “Xiaomi’s original internet mobile phone brand, our research and development, marketing and sales are the key to Xiaomi’s success,” said Lei.

Telecoms partnerships
Founded three years ago, Xiaomi sold seven million phones in the first half of this year, thanks to a mix of e-commerce and telecoms partnerships, and plans to sell 20 million of its Android-powered phones this year.

The company has been very successful at providing cheaper alternatives to iPhones and Samsung handsets, which are often too expensive for the lower end of the market.

Set to increase its handset sales almost threefold this year, Xiaomi has for the first time become profitable in the current year.

Revenue in the first half more than doubled to 13.2 billion yuan (€1.59 billion) and may rise to 28 billion yuan (€3.37 billion) for the full year.

China is the world's largest internet market, with 591 million users, and last year saw a 20 per cent rise over the previous year in the number of people who surf the web from smartphones and tablets.

Last month Xiaomi released its MI3 smartphone, which the company claims is the world's fastest smartphone, and which has a five-inch screen and a five-megapixel camera and uses Qualcomm's Snapdragon and Nvidia's Tegra 4 processors.

The handset runs on all three major carriers in China, including China Mobile, the biggest carrier, which has proved elusive to Apple, which is still trying to secure a link-up with it.

The 16-gigabyte version retails for just 1,999 yuan (€240).

“Consumers like Xiaomi because it has gone beyond users’ expectations and established a very good reputation. Xiaomi mobile is a high-performance, cost-effective smartphone,” said Lei.

Lei is in no way your typical Chinese tech entrepreneur. For one, he did not study in the US, unlike like Baidu's Robin Li. Nor does he speak English. Previously, as an angel investor he involved himself in domestic firms, avoiding higher-profile companies.

His career arc is impressive. He co-founded Joyo. com, the online retailer of books, music and videos, which was sold to Amazon in 2004.

With Xiaomi, Lei built up market share by selling phones at about a third of the latest iPhone’s cost in China, where it outsells the Apple product.

Software updates
It runs Xiaomi's customised version of Android, as well as standard Android – much of the company's research and development involves Xiaomi engineers gathering feedback from users and then using it to modify the software. The software is updated every Friday, which is how Xiaomi makes its money, as it sells its handsets at about cost price.

“One-third of the function of the Xiaomi system comes from feedback submitted by the users, which has given them a great sense of participation,” said Lei.

“The phone is a carrier. We make our profits through content and services,” said Lei.

This kind of functionality at such a low price would suggests the possibility of an overseas move at some point. In August, Xiaomi hired Google executive Hugo Barra, a strong signal of the group's international intentions.

"He will be in charge of international development. Xiaomi attaches great importance to the overseas market and we are hoping that Xiaomi can become an international mobile phone brand," said Lei. Last April Xiaomi successfully entered the Hong Kong and Taiwan market, he added.

While the group has foreign ambitions, Lei believes there is still much to do in China, which is the world’s largest mobile phone market by subscribers and one that continues to expand.

“China’s smartphone market is entering a boom era. In the next three to five years there are still huge opportunities in the Chinese smartphone business,” said Lei.

“Innovation is fundamental for Xiaomi. Xiaomi adheres to innovation and adheres to the entrepreneurial mindset. Since its inception, Xiaomi has changed the rules of the game in the mobile industry and created a new mobile phone category by the triathlon of software plus hardware plus service,” Lei said.

“I have attracted my share of imitators. This year Xiaomi will open up subversive innovation with internet-ready TV.”

Xiaomi’s next move could also cause headaches for Apple in China, as it starts selling the MiTV, a 119cm television set that will connect to the web and run the Android operating system yet will cost just 2,999 yuan (€360).

He is a self-professed geek-lover who makes products for geeks. What is remarkable is how many geeks there are in China. Next step will be to see how big a seller geek chic is outside China.