Hugo Barra

Xiaomi Phones: Headed for U.S., but Some Wait to Come

Xiaomi’s Hugh Barra is ready to bring the hot growth of its Chinese phones to the the U.S. But, in a presentation at Re/code’s Coder conference, Barra made it clear there is a whole lot of change that needs to be made before it can sell anything more than a handful of accessories in the US market. Unlike other losses such as Huawei found in the market, he’s not going make a lot of mistakes heading for the top.

The problem isn’t the phones themselves. They are beautiful, matching leaders such as Apple and Samsung. And their pricing is phenomenal, selling high quality phones at $315 with no service charges. Barra says the prices are primarily the result of direct sales to consumers, excellent cost from key suppliers such as Qualcomm, and keeping the product in market for about 18 months allowing for falling component parts.

The U.S. market, however, will be difficult for Xiaomi to be a big player. Even though some carriers say they are getting tired of the duopoly of Apple and Samsung, they are actually increasing the market for a duopoly with their payment plans. Even phones being sold handled by retailers with carrier sales, whether it’s at Amazon or Best Buy.

It is unlikely carriers will front the advertising bill for Xiaomi like they do for other devices. Which means they would also need to create their own advertising, which is expensive and would eat into margins (ask Samsung how much that can cost). Primarily however, Xiaomi would need to change their phones for the U.S. market and they will have a tough time with retailers.

Another thing in the way of Xiaomi are areas where they seem to have more focus than the US for the time being. The company is, of course, already a major player in China (fighting mainly with Apple, Samsung, and Huawei) but its offerings in a rapidly growing market like India seems more attractive than pushing for the U.S. “There are countless things that need to be done,” Barra says. “And I don’t want to try to live in both San Francisco and Bangalore.”

Xiaomi will also have software challenges in the U.S. There are two approaches in the bulk of U.S. — Apple and full Google Android. The Xiaomi phones sold in China avoid the Google services, which are not allowed there, by using the Android Open Source Project and proprietary local services. In Hong Kong, India, and elsewhere, Xiaomi are sold with AOSP helped with a collection of Google standard services. Will that provide success in the U.S.? Time will tell.

The company is trying a very slow and simple retailing effort in the U.S. It has opened some Mi Stores, but currently offers only three products: a tracking band, a battery charging brick, and wireless headset. They are very attractive and at very competitive prices, but that is pretty limited competition. The products are not made by Xiaomi, but are only made by approval and co-branded.

Barra once ran Android’s Nexus phones, not a great experience. But he does seem to have learned a great deal in the U.S. Watch for Xiaomi to take its time and not move hard into the U.S. for quite some time.

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Steve Wildstrom

Steve Wildstrom is veteran technology reporter, writer, and analyst based in the Washington, D.C. area. He created and wrote BusinessWeek’s Technology & You column for 15 years. Since leaving BusinessWeek in the fall of 2009, he has written his own blog, Wildstrom on Tech and has contributed to corporate blogs, including those of Cisco and AMD and also consults for major technology companies.

13 thoughts on “Xiaomi Phones: Headed for U.S., but Some Wait to Come”

  1. I’m not sure what “In Hong Kong, India, and elsewhere, Xiaomi are sold with AOSP helped with a collection of Google standard services” actually means ?

    Any GMS-Android phone is “AOSP + the Google services”. Do you mean that not *all* Google services+apps are included ? That would be a first ! And I’m not aware that’s the case… Phones are either GMS-Android with the full stack of Google stuff, or AOSP with none of it. No in-between.
    AFAIK, outside of China, Xiaomi phones are sold with the full Google stack (PlayStore etc…), in the same setup as all other OEMs: a few OS modifications, oh-so-dear custom launcher and proprietary apps, and then the Google smörgåsbord. No partial Google services. No “AOSP + a collection of Google services” (which seems to imply it’s not the **full** collection of Google services). Just regular GMS-Android like everybody else, maybe with a less sucky custom launcher than others.

    So, is it GMS-Android, AOSP-Android, or a first-ever partial GMS ? I’m willing to bet it’s regular GMS, which kinda hurts the “AOSP is taking oveeeeeer !” argument I’ve been seeing pushed for a while ?

    1. Out side of mainland China, Xiaomi ships GMS devices and Google services. What is interesting is there are two types of certifications a vendor can pass. GMS is one and I’m blanking on the name of the other. Cyanogen for example is GMS certified but not for the other one which goes beyond the Google apps and has even deeper integration with Google services. This is why Cyanogen can ship devices with GMS but have holes to plug with other / competing services at the same time.

      The AOSP taking over is not a reality in the current smartphone market, only applicable to next billion plus customers where the business model is different. For those online today via a smartphone the world looks very different than the next few billion. This is where Android will likely diverge in my opinion.

      1. OK, thanks for the clarification. The sentence should be “In Hong Kong, India, and elsewhere, Xiaomi are sold as full GMS handsets like everyone else’s” then.

        As for Cyanogen being GMS -certified that’s plain impossible:
        1- CyanogenMod isn’t, that’s why the gapps are a separate download: http://wiki.cyanogenmod.org/w/Google_Apps . Note the “The Google Apps packages are NOT SUPPORTED in any way by CyanogenMod.”, and they got cease-and-desisted when they were bundling them http://androidandme.com/2009/09/news/cyanogenmod-in-trouble/
        2- Cyanogen OS as a whole can’t be GMS-certified, because GMS certification is by device.

        As far as “the other Google agreement”, the one thing I remember reading about (but can’t find again) is a marketing agreement, where Google kicks back some of the ad $$ to OEMs that do a few extra things on top of barebones GMS compliance.

        While looking for that agreement I came across 2 interesting things:
        1- a post on Ars from a Googler, that clearly explains the philosophy in AOSP vs GMS: http://arstechnica.com/information-technology/2014/02/neither-microsoft-nokia-nor-anyone-else-should-fork-android-its-unforkable/?comments=1&post=26199423
        2- a nicely done recap about the GMS vs AOSP framework: http://mobiforge.com/news-comment/android-forks-why-google-can-rest-easy-for-now

        1. Exactly what you are describing is how I understood it until I got to read the contract and discuss with the OEMs and Cyanogen. I can’t say much more but to consider all that stuff more recommendations than a firm stance by Google. 😉

          Agree on the Mod stuff but whats happening with devices, GMS, OSes, etc is much more grey than black and white.

      2. The way I see it, right now Cyanogen is (with Cyanogen-OS, not -mod) a contract Android customizer, that does for smaller OEMs what bigger OEMs do themselves: some OS tweaks, different launcher, some extra apps. Then the OEMs go back to Google, pass the compatibility suite (which CyanogenOS as a baseline does pass), sign the marketing/licensing agreement, and get the GMS stack.

        There’s been talk around an agreement with MS to bundle apps (‘cos everyone loooves more bloatware ^^ I’m curious about MS apps usage on Android… Skype still doesn’t even have a widget, which is about as tone-deaf an Android dev can be, and my main reason for switching everyone I can over to Hangouts) and cross-OEM apps and services. That’s compatible with GMS, which doesn’t preclude any changes nor extra apps, as long as Google’s are all there,not disabled, and prominently featured.

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