Xiaomi, the Chinese smartphone maker, just announced that it has acquired a few patents from Microsoft as it prepares to enter the US market for the first time.
In case you missed it, Microsoft announced last month that it was exiting the smartphone business, which all but kills Nokia phones for good – an acquisition that cost Microsoft north of $7 billion.
This new effort by Xiaomi is an attempt to both siphon any remaining value out of the Microsoft patents as well as stave off some potential patent infringement in the US. Remember, some Chinese companies don’t always play by the same rules as everyone else when it comes to patents and intellectual property.
The deal also allows some Xiaomi devices to come preinstalled with Microsoft’s office apps.
Is the time right for a Xiaomi phone in the US?
For Xiaomi, it’s as good of a time as any to enter the US market considering the recent sluggish sales performance of the iPhone. But the reality here is that the US market has two entrenched brands with very loyal consumers already: Apple and Samsung. Breaking into the US market, especially with a phone that’s been called an iPhone clone, is going to be exceptionally difficult if not impossible.
I can’t go so far as to say it can’t be done. But let’s take a look at the power of brand in the smart phone category. In 2015, Apple, Samsung and LG accounted for a shade under 94% of the US smart phone market sales. (This is even with a powerful brand like Google, which owns Android, in the market.) Now Xiaomi, a Chinese brand with all that baggage for the US market, will try to break through.
The only possible way Xiaomi can break in is with its brand – it will have to mean something more than the brands of Samsung and Apple, more than the Galaxy and iPhone. It won’t be able to get more distribution than Samsung and Apple. It may be a lower priced option but that could only mean cheap. Even though some of Xiaomi’s devices will have some features and performance advantages, they’ll pale in comparison to the consumer loyalty enjoyed by Samsung and Apple.
Good luck, Xiaomi. You are going to need it. But if you don’t want to rely just on your luck, give me a call.