Xiaomi founder expects a “protracted war” in the smartphone sector until 5G goes mainstream

Xiaomi’s new, slightly less ambitious goal is to be among the top 3 vendors in China.

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At a closed-door conference held at Xiaomi’s headquarter on Tuesday, the firm’s founder and chairman Lei Jun spoke of “the coldest winter for China’s smartphone sector” and that Xiaomi should distance itself from the illusion that it could score quick victories soon, 36Kr reports, citing sources who attended the meeting.

Instead, Xiaomi needs to be prepared for a “protracted war” before there is a mainstream adoption of 5G phones, which Lei Jun expects to bring new growth momentum to the industry.

In 2017 Lei targeted for Xiaomi to regain the crown as China’s largest smartphone vendor within “10 quarters”, but at this closed-door meeting, he said the company now aims to at least be “among the top three smartphone sellers” in the next three years in China, a less ambitious goal.

Market research firm Canalys’ data shows that in the first quarter of this year, Xiaomi was the fourth largest smartphone vendor in the Chinese market with 10.5 million units shipped. It had a 11.9% market share. Xiaomi still lagged behind Huawei, Oppo and Vivo.

Anticipating hard times, Xiaomi has rolled out a series of changes.

To boost its smartphone sales, Lei started to take charge of the company’s China region business himself on May 17. Last week, Xiaomi’s China region set up an offline business committee to boost sales via bricks-and-mortar stores.

Also at the closed-door conference, Lei announced that his company will spend RMB 5 billion (USD 724.3 million) more in the next three years, in addition to previously allocated budgets, to improve sales channels. The additional investment will mainly be used to provide extra bonuses to award partners and to build sales staff.

Although there is no detailed public data on Xiaomi’s previous budget plan, its entire sales and marketing expenses in 2018 amounted to nearly RMB 8 billion (USD1.2 billion), which makes this additional earmarked sales budget look like a big sum.

Xiaomi, which once mainly relied on online channels for sales, started to build bricks-and-mortar stores much later than its peers Huawei, Vivo and Oppo.

36Kr is KrAsia’s parent company.