This article is based on an article from the Japanese edition of Engadget and was created using the translation tool Deepl.
Xiaomi held an online conference for the Japanese market on Aug. 31 to reiterate the Mi 10 Lite 5G, which will be released by KDDI on Sept. 4, as well as unveiling the Mi Smart Band 5, two wireless earphones and an air purifier for IoT products.
To coincide with this, Steven Wang, the company's general manager for East Asia, who leads the company's Japan operations, sat down for an exclusive interview to talk about how the Mi 10 Lite 5G came to be launched in Japan and Xiaomi's efforts with the carrier. He emphasized that the Mi 10 Lite 5G is a device that is worth more than its price.
"The quality is very high and the design is excellent," he said. "We also wanted to make the camera the best system at this price point. it uses a 5G-capable Snapdragon 765G and has a high performance". The display is a Samsung OLED and the use of "Gorilla Glass 5" on both sides of the front and back, and he is confident that "the components are also premium".
Despite this, the Mi 10 Lite 5G is reasonable at 42,740 yen, which is an unusually low price for a 5G phone in KDDI's lineup and even SIM-free. We asked him why and how it was introduced in Japan. Here's the answer to each question.
Why did you launch the Mi 10 Lite 5G as the first model with 5G support in Japan among your various lineups? What is the background to this decision?
As for Xiaomi, we currently have more than 10 5G devices in our portfolio. Out of all of them, we thought this device was the best fit for the market and the right product at the right time. We didn't go for a high-end 5G because there are already quite a few high-end models on the market as consumer choices. But Xiaomi believes that in order to move 5G forward, we need to make 5G available to everyone. In order to do that, it needs to be a little more affordable, so it has chosen a price point that is easy to buy.
To go a bit further into the technology side of things, the first 5G chipset available was the Snapdargon 865, followed by the Snapdragon 765G. We've chosen the Snapdragon 765G to be the fastest and most cost-effective of them all, and the Mi 10 Lite 5G is a very well-balanced product among our devices, and all of the components we use are at a premium. It has an excellent design and is lighter than other 5G devices. The camera and performance are also good.
You mean in line with market trends Does this mean that you may introduce high-end models in response to the expansion of the market?
That's a definite possibility. We're going to release more devices in the future.
The price is unbeatable for a 5G model, but what made it possible?
At Xiaomi, we want to offer the best price by any means possible. We have been able to succeed because we have been able to offer a quality product at a lower price than our competitors.
One of the reasons why we have been able to do that is because of our low-profit margins, and we have made a commitment to make sure that our hardware business does not makeup 5% of our net profit. We made that commitment in 2018, and since then, our net profit has been hovering at less than 1%. If you subtract the development and sales costs, the price of the product when customers actually buy it is close to what it was when it left the factory. We believe our costs should be this much.
The same is true for factories when it comes to price optimization, and this is only possible because we have a large scale. To give an example, if another company is developing a 5G phone and sells one million devices per year, they have to cover all their development costs with one million units. On the other hand, we have more than 10 5G devices, and we sell a significant number of each, so our cost per device is much lower than the competition. So we will continue to optimize our costs in that way.
In terms of products, Xiaomi has released a number of IoT-related products as well as smartphones. Does this have an impact on cost reduction?
It helps us to optimize our scale. Because we have a large number of products, we don't need to be dependent on one product and we have a common supply chain. For example, we're number one in the world for smart bands and we have the second best-selling product in the world for wireless earphones. This means that we have the largest manufacturing in many categories, not just smartphones. When you combine these, the scale is even greater and it's a virtuous model.
In terms of IoT, for example, I think Apple has been able to increase the value of the iPhone by coming out with the Apple Watch and AirPods, which has had some kind of enclosure effect. How about your company?
The same thing is happening. IoT products are also useful in terms of brand recognition. If you buy a smartphone once, you'll keep using the same one for about two years. And the price is more expensive than IoT products. In contrast, earbuds and smartbands are available for about the price of one good meal, which means that the bar is lowered for people to experience Xiaomi's products. If people are surprised by the value for money, they'll be glad they bought this product.
Interestingly, if people become fans of Xiaomi through this, they will buy the company's products one after another. Moreover, people who love Xiaomi will buy the products without looking at the price tag, just like they do at Uniqlo or Muji. This is because they know that if they buy a product, it will always be worth the price. In terms of branding, offering a lower price tag is more effective than advertising. We think it's also the most honest thing to do as a promotion.
The second is the ecosystem, which we haven't launched in Japan yet, but once we have a user base in place, the Mi Home app will come alive. This is an app that allows you to control all the products in your home, and the more you buy IoT products, the more convenient your life will become.
The Mi 10 Lite 5G is available from KDDI. What was the deciding factor in adopting the carrier?
We haven't talked directly with KDDI about why they chose us, but from Xiaomi's point of view, from the start of discussions, it seemed like our approach was highly compatible with KDDI's. KDDI seemed to recognize that in order to roll out 5G more broadly, they needed to keep the price low. As a result, it was decided to form a partnership to provide a quality product at a lower cost.
On the other hand, this product is not compatible with the mobile wallet Osaifu-Keitai system. There are many carrier models that do, but what will be done about this feature in the future?
The Osaifu-Keitai system is a feature unique to Japan. It will take about a year to learn, develop, and implement this feature. However, we'd like to support this feature in the future.
Despite these unique features, the Japanese market is smaller than that of China and the U.S. What does the Japanese market mean to Xiaomi?
That's a good question, and Xiaomi started expanding its global expansion about four years ago. Initially, we have been entering markets with large populations and low barriers to entry. India, Southeast Asia, and the Middle East. But if you look at the global scale, Japan is still a very populous country, and it's a global investment target. Brand-wise, Xiaomi will have to succeed in Japan, which is one of the top countries, if it is to grow into a global brand in the real sense of the word.
We also know that Japanese consumers have a very high level of sensitivity and understanding of ourselves and our business model. In that sense, Japan is a very good market and one that we believe Xiaomi needs to take the next step in its development.
Related article (Japanese): Xiaomi Introduces Mi Smart Band 5, $2,490 Wireless Earphones in Japan
This article is based on an article from the Japanese edition of Engadget and was created using the translation tool Deepl. The Japanese edition of Engadget does not guarantee the accuracy or reliability of this article.