Top executives of the smartphone maker said in San Francisco that it was opening an online store in the US later this year. But the Chinese company is nowhere ready to really challenge Apple, which is the market leader in the US. The store will only sell handset accessories including headphones and affordable fitness bands. Its flagship products – the smartphones and tablets – will not be available for purchase.
Hugo Barra, Xiaomi’s vice-president in charge of international operations, said Xiaomi will be very cautious about launching the Mi devices in the US market.
“The amount of effort required to bring those products (smartphones and tablets) to market is significant. We just have to move at the right pace,” Barra said. “So we are accelerating our entry in a sense by bringing simpler products.”
Barra, a former Google Inc executive who joined Xiaomi in 2013, said manufacturing, software compatibility and regulations are among the biggest hurdles for the company to introduce smartphones in developed markets including the US and Europe.
The small patent portfolio of Xiaomi will greatly hinder its business outside China.
Earlier this week, Qualcomm Inc, the world’s largest mobile chipmaker and investor of Xiaomi, was fined a record 6.08 billion yuan ($975 million) for violating China’s antitrust rules.
The US company also pledged to change the way it practiced the cross-licensing policy in which clients surrender their patents to Qualcomm in exchange for its technology.
Large smartphone vendors in China have criticised the model because smaller players can use their patents for free under the protection of the cross-licensing contract they have signed with Qualcomm.
Milly Xiang, an analyst at research firm IDC, said young vendors with fewer patents may face lawsuits if companies such as Lenovo Group Ltd and ZTE Corp stopped signing cross-licensing deals with Qualcomm.
Without the protection of Qualcomm, Xiaomi, a less than 5-year-old company, has to be cautious in patent issues.
Lin Bin, president and co-founder of Xiaomi, was quoted by Bloomberg News as saying that the company had been filing thousands of patents because lawsuits are inevitable.
Xiaomi’s overseas expansion plan encountered a major setback in India last year after Ericsson AB sued the Chinese company for stealing patents. A local court at one time banned Xiaomi from selling its smartphones. In Singapore, the only developed smartphone market where Xiaomi has a presence, Xiaomi faced privacy investigations.
In addition, Xiaomi is inexperienced in selling devices with US carriers, another barrier for its US market entry.
Bryan Wang, vice-president and principal analyst at consultancy Forrester Research Inc, said telecom carriers are the biggest smartphone distribution platform in the US and it needs a long time for Xiaomi to forge relationships with the carriers to put the Mi phones in AT&T and Verizon’s outlets.
“In the US, people are used to purchasing contract phones and top-tier devices such as the iPhone 6 can be really cheap compared to their original price. Xiaomi will find very difficult to survive when competing with Apple head-to-head,” Wang said.
Xiaomi said its smartphone and tablet users exceeded 100 million. The company is fighting for the title as the top handset vendor in China with Samsung Electronics Co.