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Analysts optimistic about Xiaomi's entry into Brazil

Updated: 2015-07-20 05:30
By Zheng Xin (China Daily Latin America)

Xiaomi's entry into the Brazilian market is "necessary" for the Beijing-based technology company to win the global market, according to an analyst.

"Places like Brazil and India are essential and integral parts of Xiaomi's going global strategy," said Derek Dong, group account director of research agency Millward Brown, a global market-research firm based in New York.

"Often called the 'Apple from China', Xiaomi has enjoyed unexpected rapid growth since it was founded in 2010, and one of the major reasons is its high-end smartphones at near cost, usually half of Samsung and Apple products with similar hardware."

Xiaomi, meaning "little rice" in Chinese, has been creating a buzz in China for its smartphones priced close to cost yet with full features, together with its tablet computers, routers and television sets.

Dong said the reason for Xiaomi's success has to do with its competitive pricing strategy that will work in markets like India, Russia, Indonesia, Latin America, and Thailand, where people consider both quality and affordability while shopping for smartphones.

"These are the places where you can replicate what the company has done in China," he said.

Vice president of Xiaomi International Hugo Barra said that the company also uses the same competitive pricing it employs in China when it launches products in foreign markets.

In May 2014, the company showed its determination to take on Apple and Samsung in the global smartphone market by revealing international expansion plans that target 10 other countries and regions, including Brazil.

Xiaomi's Redmi 2 smartphone, the company's first device sold outside Asia and first manufactured outside China, went on sale on its online store at 12:00 am local time on July 9.

The first batch of smartphones exclusively for consumers with reservations was so popular with locals that the number of buyers trying to get on the website overwhelmed the system and had to be shut down. It returned to normal about 90 minutes later.

Barra said it's no surprise that the Xiaomi smartphone is a success and it's natural that Xiaomi is well received in the Brazilian market, citing Indian consumers buying all the 40,000 smartphones in 4.2 seconds in September 2014.

However, prices might be more difficult to keep low in Brazil than in China, said Dong, as Brazil's higher labor and logistics costs, with an unlocked 16-gigabyte iPhone 6 starting at $1,130 in Brazil compared to $650 in the US.

Xiaomi and other foreign electronic manufacturers that entered the Brazilian market have encountered the same challenges, taxes and higher labor costs.

One of the reasons is the heavy tax that the Brazilian government imposes on electronics imports, and the tax breaks to manufacturers that assemble their products and source components locally.

Dong said the entry to Brazil will be a test for Xiaomi to see if has the capacity to work under new pricing standards, which can be a challenge or a chance.

Dong also added that Hugo Barra's joining Xiaomi as vice president of Xiaomi International makes Xiaomi's entry into the Brazilian market more optimistic

"He is also a former Google Inc., executive while Barra himself is from Brazil as well," said Dong.

Dong said the localization of talents might greatly help Xiaomi further explore its international market, and increasingly Chinese enterprises have realized the importance of hiring global and to employ those from the local market to do business.

Barra might know Brazil better than anyone else in selling smartphones, and he might make a substantial difference in the game, said Dong.

Dong added that Xiaomi has to also make a presence in the "trend-setting countries," like the U.S. and Europe, markets more challenging to conquer yet necessary to take on.

"Xiaomi is set to be a global company that happens to be in China," he said. "The first step outside Asia is very important in the global layout."

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