What a difference a year makes. It was almost exactly this time last year that smartphone sensation Xiaomi was king of the world, after closing a major new funding round that valued the company at a lofty $45 billion just 5 years after its founding. That was the last time Xiaomi boasted of its high valuation, and since then the company’s name has become more associated with marketing snafus, product delays and minor scandals involving issues like false advertising.
So it seems appropriate that Xiaomi is kicking off the new year with yet another new scandal, this one involving its air purifiers that were at the center of yet another scandal when they first launched about a year ago. This time the bad news is coming from Shanghai’s quality regulator, which says Xiaomi’s air purifiers fail to meet its standards.
The latest scandal probably isn’t a big deal for Xiaomi, which rapidly rose to become the world’s third largest smartphone brand on the strength of its trendy models sold mostly online. The company has also dabbled in a wide array of other products, including TVs, set-top boxes and air purifiers, as part of its broader vision of building an ecosystem of smart devices that talk to each other.
The air purifiers were never a huge part of that vision, but instead were more designed to grab attention due to China’s big pollution problems that have led many consumers to buy such devices to clean up air in their homes. Xiaomi rolled out the purifiers at the end of 2014, and almost immediately was attacked by a Japanese company that said the product copied its own designs. (previous post)
Now the same devices are back in the headlines, with Xiaomi failing to meet the Shanghai quality bureau’s standards based on tests performed on random machines purchased in local stores. (Chinese article) The problems are related to the volume of pollution the purifiers remove from the air, and also to their noise levels, according to the quality inspector’s report.
As a Shanghai resident, I can say that the quality inspector frequently performs this kind of test and our newspapers regularly feature stories about major brands whose products occasionally fail to meet the bureau’s standards. Usually the relevant company quietly fixes the problem and we never hear about it again, and I suspect that’s what will happen this time with Xiaomi.
Tough Year Ahead?
But the scandal does seem to hint that the New Year could be another tough one for Xiaomi, as it tries to regain some of its former glory. We still haven’t seen any final sales figures for the company from 2015, but all signs were showing it was likely to miss its target of selling 80 million smartphones for the year. And even that number that was already reduced from an original goal of 100 million at the beginning of the year.
We also haven’t seen any new fundings for Xiaomi in almost a year, which is quite a long time for a company that was growing so quickly. That means we may soon see a new funding round in the next few months, though it’s far from clear if investors will flock to Xiaomi the way they did in the past. It’s also far from clear if Xiaomi will be able to maintain its $45 billion valuation, and I suspect the figure could even come down a bit if the company decides to publicize the number.
Meantime, Xiaomi is wisely keeping a low profile these last few months as it focuses on a global expansion that has seen it move into India and Brazil, and prepare to enter a growing number of other developing markets. I suspect it may take a year or more of rebuilding to reverse its fading image in China, but some solid growth internationally could help to salvage the year ahead. In the meantime, the company can probably expect to see less coverage of these minor scandals with each passing month, as media tire of its sputtering story and focus their attention on the next hot company.
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(NOT FOR REPUBLICATION)