Where are you heading, Xiaomi?

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Where are you heading, Xiaomi?

There is a company whose products include mobile phones, chargers, air purifiers, air conditioners, water purifiers, fans, scales and running shoes. How would you categorize this company? It is not an IT company, nor a home appliance maker. It’s not a sporting goods company, either. It is hard to put this company into one category, and that is precisely the characteristic of China’s Xiaomi.

Xiaomi has recently earned a high profile in Korea. Its products have been ironically dubbed “mistakes of China.” The joke is that China only produces shoddy products, and Xiaomi’s are anything but. Therefore, they must be Chinese “mistakes.”

It seems to have few boundaries for its business. Recently, Vice President Liu De, one of the company’s founders, visited Kunming, the capital of Yunnan Province. He visited an agricultural and floriculture technology institute to sign a deal for an “Internet plus a floriculture complex.”

Chinese media reported his plans. According to the reports, Liu believes that agriculture is also entering the “smart” era, and he plans to build “smart greenhouses” on 10 hectares of land over the next three years.

Their temperature and humidity can be monitored through mobile phones. The greenhouses will produce about 20 million flowers and bonsai plants every year. De confidently announced that the project will have sales of 200 million yuan (35 billion won).

Perhaps we will soon be buying Xiaomi roses.

In cooperation with the popular sneakers brand Lining, Xiaomi is also producing “smart” running shoes. Chips are embedded in the soles to monitor the athletes’ health based on blood circulation of the feet. The shoes are supposed to calculate the right amount of exercise for an owner.

Xiaomi is applying “smart” to a whole new range of products. When the company was producing mobile phone chargers and ear phones, the business community believed it was merely in the business of smartphone accessories.

But when the company started producing air conditioners that control the wind level based on the users’ sleeping conditions and water purifiers that offer real-time monitoring of water quality through mobile phones, various industries began to realize that there was a bigger picture hidden behind Xiaomi. Lei Jun, founder of Xiaomi, calls it the “Xiaomi ecosystem.”

“Where is Xiaomi going?” is an important question because it shows the future of Chinese industry.

China has quietly observed private sector practices and adopted them as national policy.

For example, rural land reform led by households in a small village in Fengyang County, Anhui Province, brought about the country’s move toward capitalism. The evolution of Xiaomi appears to be the industrial equivalent.

During the National People’s Congress in March, Chinese Premier Li Keqiang talked about “Internet plus.” He also stressed the importance of entrepreneurship and innovation.

It was a declaration that the development models of successful companies such as Xiaomi and Alibaba will be absorbed into national industrial policy. The Made in China 2025 roadmap is an extension of this strategy.

Another reason to study the essence of Xiaomi is to understand the changes in China’s industrial structure. China’s industries are largely divided between state-owned companies and private sector companies.

The state-run companies control heavy industries, while private companies operate in light industry, IT and real estate development. The success of Xiaomi, built by a young man who respected Steve Jobs - Xiaomi products resemble Apple products - means that China is now facing an era of private companies.

As growth in China has slowed, many talked about a “hard landing” for the Chinese economy. But that is a short-sighted view based on the state-run sector, which has been struggling with surplus supplies and debts of regional governments.

The private sector, where many innovative companies such as Xiaomi, Alibaba, Huawei and Jingdong are successfully operating, is completely different. In the private sector, more companies are being started like bamboo shoots growing in the field after the rain. Will the Chinese economy collapse anytime soon? Xiaomi tells us “no.” And this is an issue directly linked to Korea.

In the economics section of popular Chinese portal Sina.com, a photo with the title “Samsung’s Crisis” was posted throughout the morning of July 24. The report said component makers of Samsung’s Galaxy phones were going bankrupt due to slow sales.

Xiaomi was the company that ended the Galaxy’s unchallenged control of the Chinese market. As China’s mobile phone market was restructured after the sudden rise of Xiaomi, Samsung has been losing market share.

Only two to three years ago, Xiaomi was just a copycat. Ignoring Xiaomi’s ambitions is a big reason why Samsung is now facing a crisis.

Now, we have to ask serious questions: “Who are you, Xiaomi?” and “Where are you going?” Only when we figure out the answers will we know where we will be heading, too.

JoongAng Ilbo, July 27, Page 32

*The author is the director of China Institute of the JoongAng Ilbo.

by Han Woo-duk

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