Xiaomi’s Quest to Become an Electronics Titan

Xiaomi has backed 56 startups so far to build smart devices for it as it looks to expand its business beyond smartphones and become a consumer electronics giant, one of its top executives has revealed.

The Chinese company, which is valued at $45 billion, sells TVs, smartphones, tablets and WiFi routers, all devices which it produces itself. But it also sells products from water purifiers to headphones, although it does not actually produce any of those.

Instead, the company, which is often dubbed “China’s Apple”, has invested in a prolific number of startups that are making products for Xiaomi.

“We build those devices through what we call the Xiaomi ecosystem. Think of it as a giant incubator of startups. Basically companies that we help start, that we fund, that we connect to our own supply chain and our own industrial design team such that these companies will produce beautiful Xiaomi branded products,” Hugo Barra, the vice president of Global Operators at Xiaomi, told CNBC in an interview.

“We have so far backed 56 startup companies as part of the Xiaomi ecosystem which are working on a wide range of different products most of which haven’t been released yet and all of which form this sort of lifestyle category and all of the smart homes, smart gadgets that we are selling.”

Hugo Barra, vice president of global operations at Xiaomi

For example, a company called Yunmi Technology produces the Mi Water Purifier. Last year, the company invested in a home-appliances maker Midea and Barra said the company puts its chips inside some of the company’s appliances. These kinds of investments highlight Xiaomi’s push to become a global consumer electronics titan and go beyond just smartphones to being present in people’s homes and everyday lives.

“We’re really putting a lot of investment into connecting everything in your life,” Barra told CNBC.

But one of the key things for Xiaomi is to expand its software and services, the key to monetizing the aggressively priced hardware it sells. For example, the company has Mi Wallet, its mobile payments service, as well as a way to sell content such as films and music to consumers that buy its phones. Its Android based TV allows people to play games and access Xiaomi’s services.

Xiaomi has expanded into new markets such as Brazil and India as its domestic smartphone market has slowed down.

The Chinese firm has not yet set foot in Western markets but did open an online store available in the U.S. and Europe selling Xiaomi accessories. But as the company looks to come over to Western markets, analysts are concerned that it could run into a host of patent issues, something that Barra expects, but says won’t be a problem.

“You have to be prepared of course to the fact that people are going to come after you and try to sue you with their own patents, with their own IP and so on and so forth,” Barra told CNBC.

“We have so far filed over 6000 patents around the world. In this year alone 40 percent of the patents that we filed we filed outside China, so we’re also prepared for that.”

Arjun Kharpal
Assistant Producer, CNBC EU News Digital Team