PCs: Xiaomi Aims Low with Notebook PC Entry

Bottom line: Xiaomi’s new move into notebook PCs looks like a necessary step toward its goal of creating an ecosystem of entertainment products and services, but is likely to suffer from weak reviews and stiff competition from established brands.

Xiaomi rolls out notebook PCs

I really want to write something positive about fading smartphone maker Xiaomi these days, but the company really isn’t giving us much suitable material with its steady string of new but uninspired products. The latest of those is a couple of new notebook PC models, marking its move into a crowded area where it will face stiff competition from established players like Apple (Nasdaq: AAPL) and Lenovo (HKEx: 992), as well as new entrant Huawei.

One could argue that while Xiaomi is coming late to the notebook PC game, such a move is still necessary since such computers will be a critical component to the company’s dream of building an ecosystem of products and services around a range of interfaces like PCs, smartphones and TVs. And Xiaomi is still ahead of the more upward trending LeEco (Shenzhen: 300104), which likes the ecosystem idea so much that it actually changed its former name from LeTV to include this recent industry buzzword.

We’ll have to wait for some reviews to start coming in before we can pass judgment on this latest product offering from Xiaomi, since solid performance is ultimately more important than the kinds slick marketing campaigns that used to be Xiaomi’s biggest strength. But based on the latest mediocre reviews for most of its other new products, and its relatively late entry to the notebook space, I wouldn’t expect the reviews will be very positive.

All that said, let’s take a look at this latest product foray by Xiaomi, which includes 2 new models. In the past media would have been buzzing about this move for at least several weeks before the launch, as Xiaomi used strategic leaks to generate excitement in a strategy similar to Apple’s. Perhaps Xiaomi did leak such information, but few if any media appeared to be interested enough to write about the move in advance.

The 2 new models include a cheaper one priced at 3,499 yuan ($522), and a higher-end model costing 4,999 yuan. (Chinese article) By comparison, the first new notebook models rolled out by hometown rival Huawei earlier this year carried a starting price tag of about 5,000 yuan, and ran as high as about 12,000 yuan. (previous post)

Low-End Success

Xiaomi’s decision to focus on the lower end of the market doesn’t come as a huge surprise, since the company has found its best success to date with its cheap smartphones sold under the Redmi sub-brand. That success hasn’t exactly been deliberate, since Xiaomi was originally positioning itself as a trendy, mid-range brand that welcomed comparisons by people who likened it to China’s homegrown version of Apple.

Analysts are pointing out that Xiaomi may face a sharp learning curve, since it doesn’t have any previous experience designing notebook PCs. I said the same thing when Huawei rolled out its first notebook models earlier this year, and predicted the company would need at least 2-3 years of trial-and-error to finally develop products that could compete with the more established brands. The same is probably true for Xiaomi, though in this case it’s far from clear that Xiaomi has the resources and time to wait for 2-3 years for its notebook business to mature.

The new roll-out does indeed give Xiaomi a fairly complete range of devices for its envisioned ecosystem, complementing its smartphones, tablet PCs and TV set-top boxes. But none of those products have attracted rave reviews and loyal followers the way that Apple does or Huawei is starting to do, and it’s far from clear they will ever find an audience. Accordingly, I expect these new Xiaomi notebooks will get lackluster reviews and post weak sales, and have serious doubts that they’ll have the staying power to find a formula for success in the next 2-3 years.

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