How Xiaomi Is Getting Ready to Enter the U.S. Mobile Device Market

 
 
By Don Reisinger  |  Posted 2016-06-02
 
 
 
 
 
 
 
 
 
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    How Xiaomi Is Getting Ready to Enter the U.S. Mobile Device Market
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    How Xiaomi Is Getting Ready to Enter the U.S. Mobile Device Market

    Xiaomi's new patent licensing deal with Microsoft could help the Chinese company accelerate its entry into the U.S. smartphone market, but challenges lie ahead.
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    Why Xiaomi Needed Microsoft's Help
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    Why Xiaomi Needed Microsoft's Help

    Microsoft has a wide range of patents that most Android device makers must license to bring their products to the North American market. In order for Xiaomi to deliver an Android-based handset in the United States, it needed Microsoft's patents, or would have to face the prospect of fighting the kind of costly and drawn-out legal battles carried out by Samsung and other device makers.
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    Microsoft Could Use Xiaomi's Help
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    Microsoft Could Use Xiaomi's Help

    Xiaomi is one of the world's most popular smartphone makers and sells millions of devices each year. Seeing that as an opportunity, Microsoft was able to get its many apps bundled with the mobile devices Xiaomi sells, dramatically expanding its presence in major Asian markets, such as China, and key emerging markets, including India. It was a smart move on Microsoft's part. It also likely helped Xiaomi in its negotiations with the software giant.
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    Xiaomi Could Come Stateside Sooner Than Expected
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    Xiaomi Could Come Stateside Sooner Than Expected

    Getting the Microsoft patent was a critical step for Xiaomi to come to the United States. But the fact that the company signed the deal in late-May suggests that it's thinking seriously about coming to the United States sooner than some had anticipated. Xiaomi has long said that it would expand to the United States but never provided a clear timetable. The Microsoft deal suggests the wheels are in motion, and Xiaomi could be in the U.S. sooner rather than later.
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    Smartphones Will Likely Come First
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    Smartphones Will Likely Come First

    So, what will Xiaomi do when it gets to the United States? Given its history, it's likely that the company will initially deliver its smartphones to U.S. customers. Xiaomi is, after all, a mobile company first, and it's known best for its smartphones. Offering those devices to U.S. customers at the onset is likely Xiaomi's best move as it tries to make a name for itself with the average consumer who knows nothing about its operation.
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    Don't Forget About Xiaomi's Other Products
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    Don't Forget About Xiaomi's Other Products

    While smartphones will come first, other devices won't be far behind. Xiaomi has built a nice product ecosystem with help from third-party companies, offering everything from streaming entertainment boxes to wearables. Xiaomi is even developing drones. It will want to offer those products to American customers as soon as possible.
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    Does A Patent War Await?
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    Does A Patent War Await?

    Fairly or not, Xiaomi has been criticized over the years for trying to "copy" Apple and other successful device makers. In fact, some of its products have resembled devices sold by American companies. So even though it has signed a patent licensing deal with Microsoft, it's still possible that if Xiaomi offers those devices to Americans, it could face patent infringement lawsuits from competing device makers.
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    The U.S. Is Warming to Chinese Companies
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    The U.S. Is Warming to Chinese Companies

    Despite lawsuit concerns, the U.S. market has started warming to Chinese companies. It wasn't long ago, after all, that U.S. lawmakers were trying to ban products from Huawei and others. Now, Google has partnered with Huawei, and Xiaomi is partnering with U.S. companies. Both lawmakers and consumers now seem far more willing to accept Chinese companies, which makes the time ripe for Xiaomi to make its move.
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    Don't Forget This Is Apple Territory
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    Don't Forget This Is Apple Territory

    Once Xiaomi's products hit the market, it'll need to get ready for an all-out battle with Apple. The company might be competing with Apple internationally with varying degrees of success, but in the United States where 110 million iPhones are in use right now, Apple is dominant. Xiaomi will need to solve a big Apple-competition problem in the United States.
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    Could Xiaomi Start A Price War?
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    Could Xiaomi Start A Price War?

    Xiaomi offers shockingly low price tags on high-end devices, and it's possible it could follow the same business model in the United States. If it does so and Xiaomi's products gain a foothold, other companies will need to respond by either offering better products or better prices. It's very possible that Xiaomi, if popular, could create a price war in the United States and start to cut into the strong margins smartphone makers currently enjoy.
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    Mobile Service Provider Partnerships Will Be Critical
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    Mobile Service Provider Partnerships Will Be Critical

    In the U.S. smartphone business, having strong relationships with carriers is extremely important. Carriers ultimately promote products, decide where to place them in stores and more. And having all four major carriers onboard is paramount. Xiaomi will need to foster strong relationships with carriers or run the risk of being buried in the back of stores, or worse, not even offered on shelves. Carrier relationships could mean the difference between success and failure for Xiaomi's smartphone efforts.
 

Chinese mobile device maker Xiaomi could increase the pace of its entry into the North American market now that the company has signed a patent licensing deal with Microsoft. The companies announced a partnership on May 31, under which Xiaomi has agreed to license patents that will clear the way for it to market more of its products in the United States. As part of the deal, Xiaomi has agreed to bundle many of Microsoft's online application services, including Office and Skype, with the company's smartphones. The agreement is a boon for Microsoft, which will now gain access to Xiaomi's growing user base. It's also one of the last steps Xiaomi needed to take to start doing significant business in the United States—a move it's been pondering for years. But questions remain over the implications of Xiaomi's eventual move, when it might make it and which products the company will eventually start selling in the United States. Xiaomi also faces challenges in trying to sell mobile devices in a market dominated by the Apple iPhone and many established Android models. This slide show discusses those concerns and the potential pitfalls Xiaomi might confront as it readies its products for U.S. buyers.

 
 
 
 
 
Don Reisinger is a freelance technology columnist. He started writing about technology for Ziff-Davis' Gearlog.com. Since then, he has written extremely popular columns for CNET.com, Computerworld, InformationWeek, and others. He has appeared numerous times on national television to share his expertise with viewers. You can follow his every move at http://twitter.com/donreisinger.
 
 
 
 
 
 

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