Shares of Xiaomi Corp. (01810.HK) jumped more than 7 percent on Wednesday as investors cheered positive news concerning the company, including the upcoming launch of its latest smartphone model, the Mi 9, the successful rebranding of its Redmi brand, and the inclusion of its shares in the MSCI China index.
These developments should help Xiaomi founder and chief executive Lei Jun in pushing the company’s share price back to its initial public offering level or even higher.
Analysts believe mainland investors were chiefly responsible for driving Xiaomi’s shares on Wednesday as the MSCI news prompted a rush of capital from the north.
The company itself added to the excitement by announcing that Redmi’s rebranding has been well-received by the market.
In a stock exchange filing on Tuesday, Xiaomi said the total shipment of Redmi Note 7 smartphones has exceeded one million units in mainland China alone since sales began on Jan. 15.
Xiaomi said the outstanding sales performance of the first smartphone since the Redmi rebranding showed that the company is benefiting from its multi-brand strategy. It is also further proof of the company’s strength in product development, supply chain management, and retail, Xiaomi said.
The smartphone maker has been under pressure to defend its market share in the home market as rivals such as Huawei, OPPO and Vivo continued to outsell the company in the fourth quarter of 2018, when its China shipments plunged 34.9 percent.
That was the second consecutive quarterly drop for Xiaomi, following a 10.9 percent decline in the third quarter of 2018.
By comparison, Huawei Technologies’ mainland shipment for the period jumped more than 23 percent from a year earlier, making it the top smartphone brand in China by shipment volume.
For the full year of 2018, Xiaomi’s total shipment declined 5 percent to 52 million units, while Huawei saw a 15.5 percent rise to more than 105 million units.
It cannot be denied that Xiaomi has not been doing well since its Hong Kong initial public offering.
The company’s management is under growing pressure to turn things around, or at least surpass Vivo and OPPO and catch up with Huawei in terms of shipments.
That’s precisely the reason why Xiaomi decided to spin off its Redmi brand for independent operations. The company wants the Redmi brand to focus on the mass market segment with high-end hardware specifications such as a 48-megapixel camera on Redmi Note 7, while keeping the price down at 999 yuan (US$147.61) per unit.
Redmi’s initial success indicates that China’s smartphone market is still being driven by the mass-user segment or those living in the inner cities. OPPO and Vivo performed quite well over the past few years by coming up with low-priced smartphones with eye-catching features such as an enhanced selfie camera.
Xiaomi is planning to reposition the Mi brand as its flagship, premium product line. Starting from the next generation of the Mi phone, the brand will no longer offer a cheap phone with premium quality. It will just be an expensive phone.
Xiaomi announced on Wednesday that it will be hosting a launch event for the Mi 9 on Feb. 20. Lei Jun said in a blog post that the new flagship will carry the internal codename “Battle Angel”. He also described it as “super-powerful” and the “best-looking” Xiaomi phone so far.
Market speculated that the Mi 9 will be powered by Qualcomm’s Snapdragon 855 mobile platform. It may support the 27W fast-charging feature. It will be running on the Android 9 Pie operating system with the company’s own MIUI 10 on top.
The model may also have a 6.4-inch display and a 48-megapixel + 12-megapixel + 3D ToF lens in its triple camera setup. It could come equipped with a front-facing shooter of 24-megapixel. The phone will also have a fingerprint sensor.
Xiaomi is quite confident that Mi 9 will be the best smartphone for its fans, but whether the new device will be able to lure new users remains uncertain. The Mi 9 will compete directly with Samsung Galaxy S10 series and Huawei P30 series, both of which will be unveiled next week.
But one of the key concerns about the Mi 9 is its pricing. A Xiaomi official hinted that the model will be priced above 4,000 yuan, much more expensive than its predecessor, the Mi 8, which was launched at a price of around 2,500 yuan.
This is one crucial test for Xiaomi as to whether it can tap the premium market
Originally published at www.ejinsight.com on February 14, 2019.