In 2013, Xiaomi represented a new sort of Chinese company: market-driven rather than state-led, and online rather than bricks and mortar
folk gathered in Beijing to honour Chinese “Economic Figures of the Year” were treated to an unexpected twist. One of the winners, Lei Jun, ventured that in five years the sales of Xiaomi, the smartphone-maker he founded in 2010, would surpass those of Gree, a manufacturer of air-conditioners with government roots. To make things interesting Dong Mingzhu, an entrepreneur and Gree’s chairwoman with whom Mr Lei had shared an award, bet him 1bn yuan that her company’s turnover would stay ahead.
The bet looked bold for Mr Lei in 2013. Xiaomi was then making a quarter of Gree’s 120bn yuan in annual sales. The “Apple of the East”, as it was dubbed, represented a new sort of Chinese company: market-driven and spunky, not state-led and stodgy; online instead of bricks and mortar; relying on digital technology rather than mechanical engineering. By mid-2018 Xiaomi’s revenue neared 90% of Gree’s . When the firm floated on the Hong Kong stock exchange last July it was valued at $54bn.
They face similar challenges, too. The competition in their core markets is stiff. Xiaomi’s margins from low-cost phones are wafer-thin. Gree has lost share of Chinese air-con sales to rivals such as Haier and Midea, which are introducing more high-tech models. Xiaomi and Gree have both taken a punt on changing their original business models. Gree is selling more online. Xiaomi is opening more physical stores.
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