Chinese smartphone maker Xiaomi Inc. announced its first foray outside Asia on Tuesday with the launch of its latest device, the Redmi 2, in Brazil.
The decision to both manufacture and sell the phone in Brazil underscores the challenges companies face in entering Brazil’s booming electronics market. Smartphone sales have doubled since 2012, to an estimated 1.45 million units this year, according to research firm IDC. But the Brazilian government heavily taxes electronics imports, while giving breaks to manufacturers who assemble their products and source components locally. That forces companies such as Xiaomi to use factories in Brazil, where labor and parts are more expensive, if they want to tap the local market.
For Beijing-based Xiaomi, the Redmi 2 launch marks the first time the company will sell a device outside Asia or assemble one outside of China. The company will import some of its parts and source others locally, a strategy that is in line with other electronics manufacturers that have entered the market, said Hugo Barra, Xiaomi’s global vice president.
“It’s a major undertaking because up until today, we didn’t have that complexity in our supply chain,” he said. From legal and accounting issues to importing parts, “it requires re-architecting a lot of our supply chain—from the components suppliers to financial systems to everything else.”
Taiwanese contract manufacturer Hon Hai Precision Industry Co., better known by its trade name Foxconn, will be assembling the devices in Brazil, said Mr. Barra, a former Google Inc. executive who himself is from Brazil.
Meanwhile, Xiaomi on Wednesday disclosed its latest hire of a senior executive with an international background. The company said Shou Zi Chew, a former partner of Russian investment firm DST Global, has joined Xiaomi as chief financial officer.
Mr. Chew, a Singaporean, was involved in DST Global’s investments in Xiaomi and other Chinese technology companies, Xiaomi said.
The Redmi 2, already available in Xiaomi’s other markets including India and Indonesia, features an eight-megapixel camera with high-definition video recording, Qualcomm Inc.’s Snapdragon 410 processor and Xiaomi’s own Android-based operating system, MIUI. It will be available for order online in Brazil beginning July 7.
Privately held Xiaomi, which some analysts value at $46 billion, got its start just five years ago and has made a name for itself battling Apple Inc. and Samsung Electronics Co. in China by selling its full-featured smartphones at near cost. The company said it hopes to replicate its strategy in Brazil, where smartphone adoption has soared over the past few years to make the country the world’s fourth-largest smartphone market.
In Brazil, the company’s low price is crucial, as it currently only has plans to sell its phones directly online, and doesn’t yet have plans to distribute through retail stores where most Brazilians buy smartphones, said Reinaldo Sakis, an IDC analyst in São Paulo.
But prices will be difficult to keep low, because of Brazil’s high energy, labor and logistics costs. An unlocked 16-gigabyte iPhone 6 starts at $1,130 in Brazil, compared with $650 in the U.S. Even low-margin handsets such as the Moto G by Lenovo Group Ltd.’s Motorola Mobility are sold for as much as 40% above U.S. prices, despite Brazil’s much lower average household income.
Xiaomi “could enter here losing a lot of money to show they are able to,” Mr. Sakis said, or they could “force the competition to work under new [price] standards.”
The company’s entry into Brazil will also be a test of its ability to draw users with little exposure to Chinese culture, and who might struggle to pronounce its name, which means “little rice” in Chinese. Anticipating this challenge, the company launched a social-media campaign ahead of its Tuesday launch event in São Paulo.
So far, it appears Mr. Barra’s stardom among gadget aficionados in his home country doesn’t hurt. Attendees of Tuesday’s launch event said Mr. Barra, as a prominent Brazilian technology executive, was greeted like a pop star, receiving cheers from a crowd of hundreds and giving fans high-fives as he passed.
Mr. Barra said he is hopeful, because the company has logged more than 33,000 likes on Facebook and received thousands of requests to attend its Tuesday event. He added that Xiaomi was well-received at its launch in India, where it sells the Redmi 2 for 6,999 rupees ($110), or less than half the price of handsets by Apple and Samsung with comparable hardware.
“We think the same might happen in Brazil,” he said. “Word of mouth and virality are huge here.”
The decision to both manufacture and sell the phone in Brazil underscores the challenges companies face in entering Brazil’s booming electronics market. Smartphone sales have doubled since 2012, to an estimated 1.45 million units this year, according to research firm IDC. But the Brazilian government heavily taxes electronics imports, while giving breaks to manufacturers who assemble their products and source components locally. That forces companies such as Xiaomi to use factories in Brazil, where labor and parts are more expensive, if they want to tap the local market.
For Beijing-based Xiaomi, the Redmi 2 launch marks the first time the company will sell a device outside Asia or assemble one outside of China. The company will import some of its parts and source others locally, a strategy that is in line with other electronics manufacturers that have entered the market, said Hugo Barra, Xiaomi’s global vice president.
“It’s a major undertaking because up until today, we didn’t have that complexity in our supply chain,” he said. From legal and accounting issues to importing parts, “it requires re-architecting a lot of our supply chain—from the components suppliers to financial systems to everything else.”
Taiwanese contract manufacturer Hon Hai Precision Industry Co., better known by its trade name Foxconn, will be assembling the devices in Brazil, said Mr. Barra, a former Google Inc. executive who himself is from Brazil.
Meanwhile, Xiaomi on Wednesday disclosed its latest hire of a senior executive with an international background. The company said Shou Zi Chew, a former partner of Russian investment firm DST Global, has joined Xiaomi as chief financial officer.
Mr. Chew, a Singaporean, was involved in DST Global’s investments in Xiaomi and other Chinese technology companies, Xiaomi said.
The Redmi 2, already available in Xiaomi’s other markets including India and Indonesia, features an eight-megapixel camera with high-definition video recording, Qualcomm Inc.’s Snapdragon 410 processor and Xiaomi’s own Android-based operating system, MIUI. It will be available for order online in Brazil beginning July 7.
Privately held Xiaomi, which some analysts value at $46 billion, got its start just five years ago and has made a name for itself battling Apple Inc. and Samsung Electronics Co. in China by selling its full-featured smartphones at near cost. The company said it hopes to replicate its strategy in Brazil, where smartphone adoption has soared over the past few years to make the country the world’s fourth-largest smartphone market.
In Brazil, the company’s low price is crucial, as it currently only has plans to sell its phones directly online, and doesn’t yet have plans to distribute through retail stores where most Brazilians buy smartphones, said Reinaldo Sakis, an IDC analyst in São Paulo.
But prices will be difficult to keep low, because of Brazil’s high energy, labor and logistics costs. An unlocked 16-gigabyte iPhone 6 starts at $1,130 in Brazil, compared with $650 in the U.S. Even low-margin handsets such as the Moto G by Lenovo Group Ltd.’s Motorola Mobility are sold for as much as 40% above U.S. prices, despite Brazil’s much lower average household income.
Xiaomi “could enter here losing a lot of money to show they are able to,” Mr. Sakis said, or they could “force the competition to work under new [price] standards.”
The company’s entry into Brazil will also be a test of its ability to draw users with little exposure to Chinese culture, and who might struggle to pronounce its name, which means “little rice” in Chinese. Anticipating this challenge, the company launched a social-media campaign ahead of its Tuesday launch event in São Paulo.
So far, it appears Mr. Barra’s stardom among gadget aficionados in his home country doesn’t hurt. Attendees of Tuesday’s launch event said Mr. Barra, as a prominent Brazilian technology executive, was greeted like a pop star, receiving cheers from a crowd of hundreds and giving fans high-fives as he passed.
Mr. Barra said he is hopeful, because the company has logged more than 33,000 likes on Facebook and received thousands of requests to attend its Tuesday event. He added that Xiaomi was well-received at its launch in India, where it sells the Redmi 2 for 6,999 rupees ($110), or less than half the price of handsets by Apple and Samsung with comparable hardware.
“We think the same might happen in Brazil,” he said. “Word of mouth and virality are huge here.”
No comments:
Post a Comment