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Xiaomi is ringing in 2017 with a cryptic message about a “daring search”

Lei Jun, founder and CEO of China's mobile company Xiaomi gestures as he attends a press conference during the period of Chinese People's Political Consultative Conference (CPPCC) and National People's Congress (NPC) in Beijing, China
Reuters/Damir Sagolj
A time for reflection.
By Josh Horwitz
Published Last updated This article is more than 2 years old.

What’s next for Xiaomi now that its smartphone business has stalled? It’s unclear whether Xiaomi even knows.

Typically the Beijing-based company releases annual sales numbers at the start of the new year. This month, however, it sent out a cryptic message suggesting that 2017 will be a time for a “daring search.”

On Jan. 1, founder Lei Jun posted a graphic on Weibo (link in Chinese) with the number “2018” in large font, accompanied by the following text:

The rewards of 2018 will be the result of a daring search during 2017 for the things we thought were fantasies in 2016. This past year, what were your fantasies? In 2017, we’ll search together.
Weibo

It’s no secret that Xiaomi is in a rut. Last year the company hesitated to disclose its annual smartphone sales for 2015 before finally announcing it sold 70 million handsets—below its adjusted goal of 80 million, and well below its initial goal of 100 million. Annual revenue growth, meanwhile, reportedly remained flat between 2014 and 2015.

Xiaomi will not likely share any such numbers this year—data from research firm IDC suggests its smartphone sales in China, its most important market, have nosedived.

Meanwhile there was little to set the company’s 2016 product launches apart. Besides upgrades to its flagship smartphones, it released a drone, a new version of its wrist tracker, a laptop, and a foldable electric bike. But consumers across Asia can easily find comparable products at the nearby electronics market.

India marks a bright spot for the company. Yesterday on Facebook, India head Manu Kumar Jain announced that Xiaomi generated $1 billion in revenue from the country. IDC data confirms that Xiaomi has indeed enjoyed a sales surge there—market share for shipments in the third quarter increased to over 7%, from 3% a year ago

But India will likely remain a far less lucrative market than China or other countries. As evidenced by the increasing “Others” segment, the nation’s smartphone market is fragmenting, not consolidating. That means that phones there will likely get cheaper than they already are—and subsequently shrink the profit margins for Xiaomi and its competitors.

In order to justify its $46 billion valuation, the company needs new ideas. A daring search seems necessary.

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