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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.