Xiaomi connects with the market

Chinese smartphone manufacturer Xiaomi, which has won a large following - and a lot of controversy - with ultra-cheap mobile devices, will break the 2,000-yuan (369 U.S. dollars) barrier when its new handset hits the market Tuesday.

The company unveiled two "Mi Notes" - priced from 2,299 yuan and 3,299 yuan - on Jan. 15, exceeding its previous price record of 1,999 yuan for a basic smartphone.

"Mi Note is a landmark product, and it will be the best Xiaomi smartphone ever," said Lei Jun, founder and chief executive officer of Xiaomi.

The reservation of the "flagship product" has reached 1 million, said Lin Bin, company co-founder and president, on his microblog on Jan. 20.

The best selling smartphones in China usually come from U.S.-based Apple and Samsung of the Republic of Korea. Xiaomi has battled for market share by keeping its prices competitive.

"May more people enjoy the fun of technology," Lei yelled to a cheering crowd at the launch of the new products at the China National Convention Center in Beijing.

Lei said Xiaomi sold 61 million smartphones last year, up 227 percent year on year, with total sales revenue (including tax) of 74.3 billion yuan (12 billion U.S. dollars).

This claim on his microblog followed the revelation that Xiaomi's market value was estimated at 45 billion U.S. dollars, about 180 times its worth when it was founded in 2010.

"Xiaomi has exceeded all science and technology companies that have yet to go public," said the 46-year-old entrepreneur.

Four years ago, the Chinese market was dominated by foreign brands. Newspapers splashed photos of people queuing for Apple's iPhone 4 and few people would consider buying handset from a domestic startup.

Now Xiaomi ranks second in domestic market and its products have been launched in Taiwan and Hong Kong as well as five neighboring countries. Its new valuation makes it the fourth largest Internet company in China, and the world's third largest smartphone producer after Apple and Samsung.

When the first Xiaomi smartphone was released in August 2011, more than 300,000 handsets sold out online within 5 minutes. Each new model has set a new record. Price-sensitive customers have been surprised to find that a Chinese-brand smartphone can have the same or better functions than the foreign brands - and for under 2,000 yuan.

Xiaomi has also developed a wider range of electronics in the past year, including a smart TV, air purifier, earphone, mobile power bank, fitness band and blood pressure monitor - all marketed as "high quality at a low price".

"As well as good performance and cheap price, I choose Xiaomi to show my support for a Chinese brand," said devoted Xiaomi user Wang Yuan.

Lei Jun is quite open about appealing to patriotism. He originally wanted to call the company "Red Star", but that name was already registered, so he changed it to Xiaomi, the Chinese for "millet". Lei said he was inspired by Chairman Mao's phrase during China's Civil War of 1945-1949.

"We want to conquer the world by using millet and rifles," Lei once said to media.

However, competitors argue Xiaomi wants to conquer the market by stealing their ideas and infringing patents.

The Xiaomi air purifier, costing 899 yuan, was criticized last month as remarkably similar to that of Japanese brand Balmuda in appearance, internal structure, and even in its marketing.

The same month, Sweden's Ericsson won a court order banning the import and sale of Xiaomi smartphones in India after claiming the Chinese handsets violated patent rights.

Lei acknowledged learning from Apple co-founder Steve Jobs in explaining the similarities with the iPhone, but critics point out that Apple has more than double the patents claimed by Xiaomi.

"Lei's salute to Jobs is just trickery to disguise copying Apple's designs," said Liu Zhirong, a commentator, who posted on his popular blog an article titled "Xiaomi discredits the reputation of 'Made-in-China'".

Like other Chinese smartphone manufacturers that have flourished in their booming home market, Xiaomi has had a rude reception regarding patent issues when it goes abroad. The company has even hit legal troubles in Southeast Asia, where IPR protection is regarded as lax.

"Most parts of a Chinese-made smartphone, including the chip, memory card, screen and operating system are imported," said Zhang Yi, chief executive officer of iiMedia Consultation Group, a market research company focused on China's mobile Internet sector.

"Once the global giants decide to use patents to contain Chinese manufacturers, the consequences can be disastrous."

Lei revealed on Jan. 15 that Xiaomi applied for 2,318 patents last year, including 665 abroad.

"In another decade, Xiaomi will have tens of thousands of patents; it will have more than any other company in the world," he claimed confidently.

In his eyes, Xiaomi is more than a smartphone maker - it is an innovator in Internet connectivity, allowing all Xiaomi devices to be controlled by a smartphone through the "Internet of things".

Lei said its "Mi" brand also stands for mobile Internet.

"I think all changes will come from mobile Internet, and from the smartphone. It could be a soul mate for people," Lei said in an Internet conference in southeast China last year.

"One day, someone might marry a smartphone."