ei Jun can still vividly recall the moment in May 2011, when his Xiaomi phone, then still under development, was technically ready to make a phone call. The sample phone was fixed to a table, so he had to bend over and press his ear against it.
“It felt like hearing the first cry of your own baby. It sounded so wonderful, as if a brand new world had opened to me,” said the technician-turned-entrepreneur, who masterminded the creation of what was one of China’s best-selling gadgets.
But Lei would have found it challenging to predict the smartphone’s booming popularity in the following couple of years.
After its launch in August of 2011, more than 300,000 Xiaomi phones were sold within a year. In 2012, sales reached 7 million , achieving a stunning growth of 2,300 percent. With an annual growth of at least 160 percent for a few years after that, Xiaomi sold more than 60 million smartphones in 2014, posting 74.3 billion yuan (US$10.68) in revenue and raising its valuation to US$45 billion during its fifth round of financing. At the beginning of 2015, Lei set a sales goal of 80 million – but the company fell short by 10 million sales.
“All work has since been done around that goal,” he said. “Under such pressure, our performance has been getting out of shape. People have been losing their smiles day by day.”
The last two years have been tough for Xiaomi. From first place in the smartphone market, it slipped to fourth, according to data from International Data Corp (IDC). (Xiaomi disputes these figures, saying sales are higher than the IDC numbers.) In the second quarter of 2016, its sales slipped by 38 percent year-on-year. Meanwhile, Fortune magazine reported that the company’s revenue had barely grown in 2015. Headlines that once said “spectacular” were now more likely to say “struggling.”
With growth stalling, the entrepreneur now wants to head back to his original mission. At the age of 40, when he started Xiaomi, Lei was already one of the country’s most important angel investors and a reputed professional manager to whose leadership Kingsoft, one of China’s earliest software companies, owed its successful listing on the main board of the Hong Kong Stock Exchange in 2008.
Lei says he isn’t motivated by just sales. According to him, his dream of building a great company and changing the public’s perception of domestic products, which was initially ignited by the description of Apple founder Steve Jobs’ career in the book Fire in the Valley, still lingers in his mind. It has now boiled down to one concrete task: making the “coolest products.”
On October 25, Xiaomi demonstrated its latest technologies by launching the Note 2 phone and its first high-end smartphone MIX. The Note 2 was highlighted as having a double curved surface. The MIX, jointly designed by Lei and French designer Phillippe Starck, is an assemblage of cutting-edge technologies including a full ceramic body and a full-façade screen.
A short review in Time Magazine highlighted MIX’s 6.4-in screen which makes up 91 percent of the body, comparing it to the two-thirds screen-to-façade ratio on the new iPhone 7. This has been made possible by what the review called a “revolutionary ceramic acoustic technology,” which has “removed the need for an earpiece speaker, and a front camera that is 50 percent smaller than standard.”
Xiaomi’s popularity didn’t traditionally depend on a technological edge, but on marketing techniques. The phones are cheaper than most retail prices, in part because they were mainly sold online, minimizing intermediate costs. This pioneering strategy was widely credited for the smartphone maker’s sweeping market success.
Lei said he aims to break the public’s existing perceptions that equate high quality with high prices. “By increasing the operational efficiency of each segment through the Internet, we have made it possible for high-end products to have an affordable price. This is the innovation of Xiaomi,” Lei said.