VIDEO: Armed With Vizio, China’s LeEco Eyes US Smartphone, TV Markets

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Bottom line: LeEco’s major new push into the US smart TV market could achieve some success due to its recent Vizio purchase, though its concurrent smartphone drive will be a dud due to lawsuits and mediocre product quality.

LeEco revs for US smart TV launch

Watch out, Comcast (Nasdaq: CMCSA) and Apple (Nasdaq: AAPL). Chinese online video superstar LeEco (Shenzhen: 300104) is taking direct aim at the lucrative US online video and smartphone markets, with plans for major new product launches later this month. I’ll admit I’m doing a bit of educated guessing here, since the company  formally known as LeTV hasn’t made any formal announcements yet on its US ambitions.

But  all the signs certainly point in that direction, following LeEco’s headline-making $2 billion July purchase of Vizio, a struggling maker of cheap, no-name TVs that is one of the biggest and also most obscure names in the huge US market. Added to that is  LeEco’s  recent issue of invitations to an event set for October 19  in San Francisco, where it says it will announce its “disruptive vision of a connected ecosystem of content-driven smart devices to the US market.” (English article)

A visit to LeEco’s own US e-commerce website provides further clues of things to come. The site, launched last year at www.uslemall.com, contains about a couple dozen smartphone accessories like earphones and speakers, all costing under $50. But a click on the other sections reserved for  smartphones and smart TVs only produces the tantalizing message “Coming Soon. Arriving October 19.”

As if all that weren’t enough, there’s also another Chinese media report saying that LeEco has recently hired a former top executive from US smartphone chip leader Qualcomm (Nasdaq: QCOM) to spearhead its push into North America. (Chinese article) According to the reports, that task will fall to Rob Chandhok, who came to LeEco a few months ago along with 2 top executives who previously worked for the North American operations of Korean smartphone giant Samsung (Seoul: 005930).

All those signs certainly seem to point to a major push into the US to be announced at the October 19 event. Such a move would come just 3 months after LeEco made a similarly large announcement that it would buy the struggling Vizio for nearly $2 billion, again implying that the Chinese high-flyer had big ambitions for the US market. (previous post)

For  those who haven’t heard of LeEco, the company rose to prominence as one of China’s earliest arrivals to the booming  online video sector that is now rapidly challenging the country’s stodgy field of traditional TV broadcasters. The company roped  in subscribers by selling them relatively high quality smart TVs at cost or even at a loss, with the requirement that they sign long-term contracts  for its online video service.

More recently LeEco’s charismatic chief Jia Yueting  has become much more ambitious, detailing plans to build an entertainment ecosystem empire that includes both smart devices like TVs, smartphones and cars, as well as the content offered over those platforms. Investors have flocked to his hype, providing him with billions of dollars for a wide range of investments and acquisitions like Vizio, some costing $1 billion or more.

LeEco Skeptic

All of that brings us to the next and most intriguing question of how LeEco is likely to fare in this US push, which would easily be the most aggressive by a Chinese tech firm in the market. I’ll openly admit  that I’m quite a LeEco skeptic, since the company has rapidly expanded into a wide range of areas beyond its core video and TV business in just a couple  of years.

But that said, I’ll also admit I’m a bit intrigued by the TV bid and would even give it a mild chance of success. That’s because Vizio already has a huge footprint in the US that LeEco can quickly tap without worries of resistance or threat of patent lawsuits. But LeEco could find itself challenged in the space due to its lack of programming compared with much more experienced local rivals like Comcast and YouTube, which will make it difficult to replicate its China business model in the US.

In the smartphone space, the company will face a very uphill road and is almost certain to fail. Equally aggressive Chinese rival Xiaomi has avoided the US  for the last few years largely due to the threat of patent lawsuits, and LeEco is likely to face such litigation almost as soon as it tries to sell anything in the market. Equally problematic is LeEco’s lack of name recognition, which has  greatly dampened reception for its phones even in its home China market. (previous post)

At the end of the day, the world of smart devices is a rapidly changing place where names like Motorola and Sony (Tokyo: 6758) show that a company can quickly transform from champion one day to has-been the next. In such a landscape there’s no reason a Chinese name can’t find a place at the global smart device table, and I expect such a development will  occur. But that  said, I seriously doubt that LeEco will become that company, and would more likely give that honor to Huawei or even the smaller and more focused Xiaomi.

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