India will cross $2 bn. this year: Xiaomi’s chief Lei Jun

Artificial intelligence will be the next wave of transformation, says Xiaomi’s Lei

March 27, 2017 10:15 pm | Updated March 28, 2017 02:11 am IST

When Chinese smartphone maker Xiaomi entered the highly competitive Indian market, not many gave the firm much of a chance. There were multiple things going against the company including the perception that a Chinese product meant cheap and poor quality. While the higher end of the market was dominated by Samsung, there were a bunch of Indian brands such as Micromax and Lava which had caught the imagination of consumers at the lower and mid segments of the market. Two years later in 2017, Xiaomi has crossed billion-dollar revenues here, catapulting itself to the number two slot. In an interview with The Hindu , Xiaomi’s co- founder, chairman & CEO, Lei Jun , talks about India becoming the largest market for the company outside of China, his next big bets and the possibility of entering the financial services market. Excerpts:

Did you expect India to grow so fast?

Over the long term, we really believe that the Xiaomi model is very powerful. Yes, the speed of growth is way beyond our expectation. In China, we have become number one, and then we became number three in the world in just two and a half year’s of our launch. Even today, we can’t believe how that happened as the competition has been fierce in this market. But the same story is unfolding in India. Two years after we launched here, we have become number two.

In 2016, you had said that Xiaomi will become the number one player in India in 3-5 years. Could you reach the target faster?

We have still two more years ( Laughs). It depends on the India team. There is a lot of pressure on them. India’s success has proven that our model can be successful even outside China.

Now that the China market itself is slowing down for you, has the importance of other markets such as India grown?

First we need to understand why there was a slowdown in China. In China, we already have majority of the market share of the online sales. But online is only 20% of the overall smartphone market in China. So, we had to rethink what we have to do in offline. After one year of experimentation, we have found the right solution. We call it the new retail or Internet plus. We can use the same cost model as in e-commerce to do offline. We can price products the same, for online and offline. In China today, we have again picked up momentum. We will try the same model in India this year.

Services is a key element of your strategy. Do you see any interesting services in India which could be part of Xiaomi?

Globally we have invested in 165 companies. We have seamlessly integrated those services into our software. We build services on our own and also work with others. The key message is ‘how do we deliver the best to users?’ We will use the same strategy here in India. If there is a start-up in India which does good work then we will work together.

Would you invest in Indian start-ups?

Of course. We are looking for more market share here, so need to work with high-quality start-ups. We are trying to help the whole industry accelerate its progress. As the mobile Internet progresses, there will be a need for better smartphones.

What are your next big bets when it comes to mobile tech?

The next wave of transformation will be in the area of artificial intelligence (AI). We have deployed a lot of engineering resources in AI. Give us some time, once we launch some products in this area, we will elaborate more. But AI will have a major impact.

There are concerns over these new technologies on social behaviour. Some say the new generation has lost social skills. How do you deal with such issues?

With each new disruptive tech comes new challenges. We need to keep an open mind and come [up] with news ways to solve this problem. For example, when steam engines came, horse-driven carts were redundant. We definitely think about these issues when we develop technology. But a lot of these have no answers yet. As the Internet opens up new areas, we need to take it step by step. For example, there are driverless cars now and if there were to be accidents, who is responsible? This may even change regulations. But as tech matures, there will be discussions. This problem will be resolved one day. We will be able to determine accurately in real time who was responsible for that accident. The reality is that the next generation is becoming stronger and stronger.

As you push for globalisation, how do you ensure that your products are relevant to the next billion users who may have never used a smartphone or experienced the Internet?

Right now, our target audience is users who know what 4G and what smartphones are. The problem that we are trying to solve is how do we make high-quality smartphones affordable. And these users who experience our phones will then recommend to their peers. There are a whole lot of users who are still in feature phones in India. That’s because smartphones are not affordable and perhaps the 4G cost is still high. We are changing that through our high-quality products at half the price. So, in a few years smartphones will be widely adopted in India. This is unstoppable.

You have financial services in China. Will Xiaomi move into this space in India?

We are exploring the possibility of providing financial services in India. But this sector is highly regulated. It requires different licences. If we could obtain such licences then we are more than happy to be part of the financial services innovation in India. We need to understand if there are limitations on foreign entities.

You are one of the players which have set up local manufacturing here. Can India match China in manufacturing? What can the Government here do more?

If the Government focuses on it, then I believe India can be at a very good level, one day. It would be great if the Indian Government can come up with more policies that would attract global players. There are already some policies in place but [it] would be great if we could get even more. Maybe the Indian Government can take best practices from other countries where manufacturing is happening and perfect that over time. The basic prerequisite is that the cost of manufacturing in India cannot be worse than other countries.

In the two years you been here, are there any learnings from India for Xiaomi

Of course. India is the biggest market for us outside China. For example, how can we bridge the cultural gapls with China. We have already invited Manu (Xiaomi India head) to become a Vice President for Xiaomi global. That will help us bridge the cultural gaps. We are also getting insights on the e-commerce and retail businesses in India. We have tried a lot of things in India which may not be similar to what we did in China. For example, in China, we began with our own website Me.com. In India, we started with the likes of Flipkart, Amazon before we started our own site.

Xiaomi has now moved beyond phones into connected machines ,TVs, air purifiers . What next? Driverless cars?

We won’t get into driverless cars directly but we have invested into companies which are working on driverless cars. We will focus on our core business. We can’t disclose what we are working on but I can guarantee you that every year you will see us launching some amazing products.

Ratan Tata has invested in the company. Has that helped you better understand the market here?

Ratan Tata’s investment in his personal capacity shows that such a well recognised business leader in India also recognises the potential of Xiaomi.

You have crossed the billion-dollar revenue mark in India. When do you cross $2 billion?

We will surpass two billion this year. Our India team has promised us 100% growth every year. The possibility of crossing two billion is 99%. There is 1% chance we may not make it.

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