Chinese smartphone upstart Xiaomi has garnered outsized attention for its place as a possible disruptor to tech giant Apple (AAPL 0.51%). For Xiaomi, the shoe fits, and the thought should loom large in investors' long-term thinking about the future of consumer tech.
Well-funded and rapidly expanding Xiaomi aspires to loftier aims than simply selling cheap Android handsets in emerging markets such as China, India, and Brazil. Recent rumors that Xiaomi is thinking of challenging Apple's multibillion-dollar Mac business demonstrates its sweeping ambitions.
Xiaomi's newest toy?
According to a Bloomberg report, Xiaomi is reportedly developing its own lineup of branded laptops, which would deepen its sizable rivalry with the likes of Lenovo and Apple. Citing sources requesting anonymity, the report says Xiaomi's plans remain in flux but that the company has held discussions with South Korean tech power Samsung about supplying semiconductors and possibly also displays for its reportedly looming laptop lineup.
The report claims Xiaomi's timetable operates with a possible early 2016 launch window, so this news certainly could evolve, especially if business conditions and consumer spending in China deteriorate, given the recent spate of market turmoil gripping the PRC. However, for a few reasons, this strategy seems perfectly in line with Xiaomi's business model as the foil to Apple's high-margin consumer-hardware model.
Xiaomi's anti-Apple business model
I've characterized Xiaomi as the anti-Apple, and it's shown its willingness to attack high-end handset makers such as Apple and Samsung in the smartphone space; sell crisply designed, quality smartphones at cost; and monetize those users with a host of services inside its ecosystem. It's modern tech's equivalent of the razor-and-blades model that so many industries have used with great success. A laptop could not only extend but also augment the 5-year-old company's still evolving road to profitability .
Although they accompany their owners everywhere these days, smartphones aren't the most ideal environment for supporting a number of computing tasks, tasks around which Xiaomi could create sizable business opportunities. Gaming and productivity apps, for example, could benefit from a large-screen environment such as a laptop. In fact, PC gaming is hugely popular in China, as consoles such as the Xbox were officially banned for years, despite a healthy black market.
The way Xiaomi views itself also suggests a move into the laptop space. Although it started with smartphones, Xiaomi and its supporters see it as far more than a tech company. Like Apple, Xiaomi considers itself a lifestyle brand, aspiring to become the first global Chinese consumer brand. Viewed this way, any number of Xiaomi-branded product lineups seem possible.
At the same time, the move would come with some observable risks for Xiaomi. Most importantly, the global PC market has struggled to maintain sales momentum over the past several years. However, Xiaomi inspires the kind of brand enthusiasm and loyalty not often associated with PC leaders such as Lenovo, Hewlett-Packard, or Dell. And although success in PCs remains far from a given, it's not without precedent, either. Here, Apple is the noteworthy exception, as its Mac business has enjoyed moderate expansion over the past several years.
However, in parsing Xiaomi's future growth strategy, one fact shines though: Xiaomi must continue to grow to justify its whopping $45 billion valuation. Considering the evidence, it seems reasonable that Xiaomi will attempt to upend yet another critical vertical in the global technology sector sooner or later.