After two years of debacle from 2015 to 2016, Xiaomi, the Chinese e-gizmo maker, has finally managed to make a successful comeback in 2017, which saw it becoming the world’s 4th largest smartphone brand by shipments in 17Q4 and crossing RMB 100b in revenue.
LEI Jun, co-founder and chairman of Xiaomi, in an internal letter sent to Xiaomi employees today, attributed the triumphant turnaround to a three-pronged reason: 1) relentless pursuit of technology innovations, 2) firm focus on quality as well as, 3) rapid growth in the global business, with Xiaomi becoming #1 in India.
LEI went on to explain that the Beijing-based company’s success ultimately comes from the core of its business model: winning enduring trust from its users.
He acknowledged in the letter that 2017 was a difficult and challenging year for Xiaomi, however, he thinks that now with the company’s “miraculous comeback” in 2017, which holds a deeper meaning for Xiaomi, now “doubts about our business model have been entirely crushed. Our business model has been thoroughly tested and we have gained a lot of confidence that we are on the right path, with the right values and the right culture.”
With 2017 becoming a bygone year, LEI also shared with Xiaomi employees his vision for the company in 2018, which according to him, will be a magnificent year.
In addition to continuous technology innovation and quality improvements, Xiaomi would keep its global expansion momentum, which contributed significantly to its global shipments last year, and push harder for greater overseas expansion.
Xiaomi currently has entered into 70+ markets globally with leading positions in some of them, LEI expects the smartphone maker to strengthen its grip over more and more global markets in 2018.
Domestically, Xiaomi is launching a battle against its local rivals with a goal to regain No.1 position in China within 10 quarters.
It won’t be an easy fight, though, against the backdrop of an increasingly heated competition, as local players are brutally vying for a market that is slated to experience a decline for the first time after more than a decade of growth.
However, there is no turning back for Xiaomi, LEI said, and it has to charge forward because China market is the company’s foundation and the largest consumer electronics market in the world and also the most competitive one.
“Only by winning in China, can we win in the rest of the world,” says LEI.
Below is a full copy of the internal letter LEI Jun sent to all Xiaomi employees:
Dear Xiaomi colleagues,
Happy New Year!
2017 has been an extraordinary year for Xiaomi. It was a “turnaround year”, but more importantly a “leapfrog year” — a critical year in breaking new ground for our future as we embark on a new journey.
Crossing the RMB 100B revenue threshold
In October 2017, we exceeded the revenue goal of RMB 100 billion set at the beginning of the year. I checked — and found out that to achieve this milestone, Apple took 20 years, Facebook took 12 years, Google took nine years, Alibaba took 17 years, Tencent took 17 years, Huawei took 21 years.
Xiaomi has taken only slightly over seven years. We are very likely to enter the Fortune Global 500 list of companies this year.
Three reasons for the successful rebound in smartphone sales
Due to the improvement of our turnover capabilities, our global shipments have improved significantly since Q2 2017 — Xiaomi is back in the top 5 smartphone brands. As per IDC, we have become the world’s #4 smartphone brand in Q4 2017 in terms of shipments. Even with the overall smartphone market declining 6.3%, we managed to maintain a year-on-year growth of 96.9% — Xiaomi was the only brand with continuous growth, demonstrating the support and recognition we received from our users.
How did Xiaomi achieve this turnaround? This is because we use a telescope to look at innovation, and a microscope to examine product quality. Innovation determines how high we can fly, while product quality determines how far we can go.
1) Relentless pursuit of technology innovations, release of Surge S1 and leading the smartphone industry with Mi MIX 2
Xiaomi is driven by an engineering culture and innovation is in our DNA. In 2017 we grew from focusing our innovations on single products to a more systematic approach.
Early last year, Xiaomi launched our first chipset Surge S1 and successfully put it into mass production. We became the fourth company in the world with the ability to design and manufacture both chipsets and smartphones.
In Q3 last year, we launched Mi MIX 2, becoming a leader in the full-screen display era, while the industry continues to follow this trend closely. It is the first time a Chinese consumer technology industry is leading the world’s evolution of technology.
Meanwhile, we’ve built the world’s biggest IoT platform with many advanced smart devices in our ecosystem and continuous investment in cloud services. We are also among the first to launch AI products in China.
So far, we have applied for more than 24,000 patents globally with 5920 of them granted, among which half are global patents.
2) Firm focus on quality, showing significant improvement
Quality is the lifeline of our company’s development. In early 2017, Xiaomi set up its Quality Control Committee with me as chairman. The quality of Xiaomi’s products and services is the most important mission of the company and we will improve product quality regardless of cost.
After a year’s efforts, our quality has improved significantly based on our original standards and these efforts have been widely recognized. Recently, Xiaomi was among the top ten in the “Made in China 2025” quality award, and I was also honored to receive a Quality personality award and was elected as Deputy Chairman of the China Quality Committee.
3) Rapid growth in our global business, with Xiaomi becoming #1 in India and global markets flourishing
We are present in 70 countries and regions so far globally and became top five in 16 markets. India is an extraordinary example. According to multiple research firms, starting Q3 last year, our smartphone market share in India has become number one. Also, with Indonesia representing Southeast Asia, Russia representing Eastern Europe, and Spain representing Western Europe, all our markets have shown strong growth.
Bumper crop of design awards
Good design is a key part of the user experience, and right from the start, it has been an important focus for Xiaomi. In fact, two of our co-founders come from a background of industrial design and have extensive experience in the field. Our ongoing investment in design was greatly recognized in 2017 when we received a host of design awards, including four major awards (IDEA Gold, iF Gold, Red Dot Best of the Best, Good Design Best 100). Led by Mi MIX and Mi MIX 2, five Xiaomi smartphones bagged international design awards. The Mi MIX series was even displayed as exhibits by a range of top museums including Centre Pompidou in France, Finland’s Design Museum and Germany’s Die Neue Sammlung.
Our success comes from the core of our business model: Winning the lasting trust of our users
Amidst the difficulties and challenges we faced, we still achieved amazing results. This victory is possible only because of the effort that our 18,000 employees have put in, the unrelenting support of our Mi Fans, and ultimately Xiaomi’s business model and values.
2017 holds a deeper meaning for us — alongside our miraculous comeback, doubts about our business model have been entirely crushed. Our business model has been thoroughly tested and we have gained a lot of confidence that we are on the right path, with the right values and the right culture.
We believe that rather than pursuing short-term gains in terms of hardware profit, making sure that our products have a good user experience will enable us to succeed in the long term. Instead of many layers in the distribution channel adding multiple costs to a product, honest pricing will win our users’ hearts. As long as we continue delivering products that are innovative, powerful, with high quality and great design, and with an honest price tag, we can win the lasting trust of our users.
And winning the lasting trust of our users is the most important thing to us. Some users have said that they can walk into a Xiaomi store, close their eyes and buy anything, because they are confident that our products offer the best quality and price. This is a really strong affirmation for us as this is exactly the ultimate goal we are pursuing. By continuing to win the trust of our users, our users will choose our products without thinking twice, and our highly efficient business model can be truly realized.
A new journey in 2018: Expanding around the world and staging a comeback in China
2018 marks the start of a new journey for Xiaomi, and it is bound to be a magnificent year. We have built a solid foundation over the last seven years, and we will ride on this momentum for greater expansion, growth and quality improvement.
While continuing to focus on technology innovation and quality improvement, we will also put in a lot of effort in our overseas expansion. In 2017, I went to India three times, Indonesia twice and Vietnam once, and I saw huge and exciting opportunities wherever I went.
We have entered more than 70 markets globally and established a leading position in many of them. But this is just a start. There is still a lot of room for growth in the markets we are present in, and we have yet to enter many more markets around the globe. Overseas markets represent huge opportunities for us and we need to give more support in terms of strategy, resources, and localized product development, as well as send more of our employees out to the rest of the world.
On the domestic front, we have to start a full counter-attack and accumulate small successes into a full victory, sparing no effort to ensure that we have the ultimate victory in 2019.
In 2018, the Chinese smartphone market is poised to experience a decline for the first time after more than a decade of growth. The market is consolidating while the competition becomes more and more brutal. There is no turning back for us and we have to charge forward. The Chinese market is Xiaomi’s foundation. It is the biggest consumer electronics market in the world and the most competitive one. Only by winning in the domestic market can we have enough support for global expansion. Only by winning in China, can we win in the rest of the world.
So this year I am setting a new goal: We will regain the #1 position in China within 10 quarters.
In this battle, we should move firmly forward and set up command center at the front line. We cannot afford to lose any province, city, county and community. We should remain brave and alert, and fight to the end.
This requires us to have strong management and organizational capabilities on all fronts. So from now on, we will nurture and promote a fleet of young and capable managers, creating a more dynamic and progressive team. We will make sure that capable, ambitious, aggressive and daring talent can learn how to fight and grow rapidly.
To everyone at Xiaomi, thank you all for your continued hard work! I hope you grasp all the opportunities in this great era and bravely shoulder your responsibilities. Let us embrace the great opportunities and challenges, and have the ambition to build a great business! Let us take on the mission of delivering innovation to everyone in the world, and write a new chapter in Xiaomi’s journey!
Lei Jun
02/07/2018