Five years ago, Lei Jun's haikou in India was half realized; however, whether the other half could be achieved in the future was a big question mark by a paper fine from the Indian government.
In the early spring of 2017, Xiaomi CEO Lei Jun flew to New Delhi to visit Indian Prime Minister Modi with the head of Xiaomi's India business.
Modi warmly received Lei Jun and others, asking about Xiaomi's progress and difficulties in India, and whether it could pre-install the Indian government's APP. He also posted photos of Xiaomi's second Indian factory on social media, calling it "an important boost to Made in India."
The strong support of the head of government made Lei Jun feel very excited. He then told Indian media that Xiaomi's short-term goal is to seize half of india's online mobile phone market.
Five years later, Xiaomi is firmly at the top of the Indian smartphone market, and although its share is less than half, it is stable at about 25%, which is also impressive. However, a ticket after New Year's Day in 2022 casts a shadow over Xiaomi's prospects in the Indian market.
On January 5, India's Ministry of Finance issued an announcement saying that Xiaomi India was suspected of tax evasion and had to pay a supplementary fee of 653 million rupees (about 550 million yuan). Xiaomi responded that the company complies with the laws and regulations of the place of operation and will continue to communicate with the relevant departments in India.
For Xiaomi, which had a revenue of nearly 250 billion yuan last year and an adjusted net profit of 13 billion yuan, a fine of five or six hundred million yuan would not have a substantial impact. However, behind this ticket is a very sinister attitude twist.
After the Modi government came to power in 2014, in order to stimulate economic development, it once welcomed Chinese technology companies. Xiaomi reciprocated by supporting modi's "Made in India" strategy, opening 6 assembly plants one after another, increasing the proportion of localized production to 95%, and adopting the slogan "Mi from India" to get as close as possible to Indian consumers.
However, in the past two years, with the change of geopolitical patterns, the Indian government has begun to adjust its policies, and the golden period of development of Chinese companies in India has actually come to an end.
Indians are the first to point the finger at Chinese Internet companies. In June 2020, India banned 59 Chinese apps such as WeChat, TikTok, and Baidu, and permanently made the ban half a year later.
India announced a list of 59 banned apps
At the same time, the Indian government has contacted companies such as Apple and Samsung, hoping to attract them to invest in factories through loan subsidies and other preferential policies, so that India can become a global mobile phone manufacturing center. Chinese manufacturers have not entered the field of vision, and there are obviously considerations for reducing the "Made in China" component of the Indian economy.
By the end of 2021, India has raided two Chinese mobile phone manufacturers, Xiaomi and OPPO, and issued large fines. ByteDance has also previously had its bank accounts frozen for tax evasion.
This does not mean that Chinese mobile phone companies such as Xiaomi and OPPO will be forced to leave India. Robin (pseudonym at his own request) has long been engaged in overseas related work, he believes that Xiaomi has a factory in India, while bringing benefits in technology and supply chain, the Indian government to throw rat traps. "The research and development of those apps is in China, and the income remains in China; Xiaomi is different, it has built factories and provided job opportunities, and it is normal for Indians to collect some taxes."
However, India is Xiaomi's largest overseas market, accounting for about 1/4 of sales last year. In the face of the situation that the mountain rain is about to come and the wind is full of buildings, Xiaomi needs to take precautions.
Looking at the global mobile phone market, the European and American markets have been saturated, and shipments have declined year by year; the Middle East and Latin American markets are particularly fierce. Only Africa, with its large population and low smartphone penetration, is still on the rise.
Previously, Xiaomi tested the African market in 2015 and 2019, but for various reasons, the performance was mediocre, and the market share was only about 4%. Nowadays, it is increasingly necessary for Xiaomi to enter Africa for the third time.
However, another Chinese company, Transsion Holdings, has been in Africa for fifteen years, even longer than xiaomi's establishment, ranking first in the African mobile phone market for many years. If Xiaomi chooses the next main battlefield in Africa, it will inevitably meet with the narrow road of transsion.
Transsion has always been relatively distant from China's Internet industry, but not long ago, Transsion recruited former Baidu senior vice president Xiang Hailong to try to accelerate the expansion of the software business in addition to the hardware business with a large amount of revenue. In this regard, Xiaomi, which started from the Internet, is enough to be a teacher of sound transmission.
Africa is a market with great potential. It has a population of nearly 1.3 billion, comparable to China or India; the annual population growth rate is about 2.3%, far exceeding the 1% growth rate in Asia.
At the same time, limited by the level of economic development, functional machines still occupy the mainstream of the African market. According to market research firm IDC, African mobile phone shipments in 2018 were 215 million units, including 127 million feature phones, accounting for 59%.
The gradual replacement of functional machines by smart phones is the trend of the times. The Global Association for Mobile Communication Systems predicts that smartphone penetration in sub-Saharan Africa will increase significantly to 67% by 2025, from 39% in 2018. This provides enough space for Chinese mobile phone manufacturers to conquer the African continent.
As early as the end of 2015, Xiaomi has tested the African market, and has sold Xiaomi 4 and Redmi 2 products in South Africa, Nigeria and Kenya, which are in better condition.
Unlike domestic online sales, Xiaomi chose to cooperate with a dealer named Mobile in Africa, who is responsible for imports, logistics, marketing and after-sales, and only provides the source of goods. But this cooperation did not stir up much waves.
In 2019, Xiaomi is facing increasing competitive pressure in the domestic market and has begun to invest more resources overseas, and the African market has once again gained attention.
In January of that year, Xiaomi announced the establishment of the Africa Regional Department, which was headed by Vice President Wang Lingming and reported to Wang Xiang, Senior Vice President of Xiaomi. Unexpectedly, only 4 months later, Wang Lingming was administratively detained for illegal acts and was immediately dismissed by Xiaomi.
This unexpected event has obviously adversely affected Xiaomi's expansion into the African market. But even without this crying and laughing coaching storm, Xiaomi's performance in Africa is not satisfactory.
According to market research firm Counterpoint, Xiaomi's market share in Africa increased from 2% to 4% between 2019 and 2020; at the same time, the share of TRANSSION's three major brands TECNO, itel and Infinitix increased from 34% to 37%. Considering the huge local feature phone market, Xiaomi's presence in Africa is actually lower.
Xiaomi spent three years and still has difficulty conquering the African market, and the terminal price is the most direct obstacle.
According to Xiaomi's 2020 financial report, the average selling price of Xiaomi smartphones during the reporting period was 1040 yuan. For domestic and European and American users, this price is not high; but in Africa, where per capita income is extremely low, spending nearly $200 on a mobile phone is still a rather luxurious consumption.
However, Xiaomi does not seem to pay attention to the price problem, and directly takes the main products of the domestic or European and American markets to Africa for sale.
Nigeria, for example, has a population of over 200 million and a relatively developed economy, making it one of the most important single-country markets in Africa. At present, the flagship model of Xiaomi Nigeria's official website is the Mi 10T, which is priced at up to 300,000 Nigerian naira (about 4600 yuan). The cheapest is the Redmi 9A, which costs 41,000 naira (about 630 yuan).
In contrast, transsion's mobile phone prices are much more affordable.
According to the TRANSSION prospectus, the average selling price of its smart phone in 2018 was only 454 yuan, of which the high-end Infinix, the public-oriented TECNO and the young brand ital were located in the range of 600 yuan, 500 yuan and 300 yuan respectively.
Feature phones are cheaper. Prospectus, the average price of the TECNO functional machine is 77 yuan, and the itel functional machine is further reduced to 60 yuan. Buying a phone for less than $10 attracts African users more than hundreds of dollars.
However, in recent years, TRANSSION has also increased the proportion of smartphone sales and increased the price range of the entire mobile phone business. After all, if the price is only one-tenth of that of other manufacturers, sales must be ten times that of each other to close the gap; and in the highly competitive mobile phone market, TRANSSION cannot maintain this absolute advantage forever.
This also means that in order to truly occupy a place in the African market, Xiaomi needs to launch a cheap product line that is very different from other markets, but then broaden the product line from the bottom up and increase the added value.
In addition to price, Xiaomi also faces challenges in terms of products, channels and marketing in Africa. The transmission just gave Xiaomi a sample, which can press Tu Suoji.
Transsion entered Africa in 2007, xiaomi was officially established three years later, and it took another 5 years to start selling mobile phones in Africa. In the past eight years, TRANSSION has explored a development path in Africa that adapts to the needs of local markets.
In terms of products, in addition to pulling the price of mobile phones to $50 or even below $ 10, TRANSSION has also made a lot of localization improvements for the particularities of the African market.
Part of this is to solve the problem of poor local infrastructure. Many areas of Africa power supply is unstable, mobile phone charging trouble, TRANSSION early mobile phones are supported ultra-long standby, up to 28 days, basically to achieve a monthly charge; Africa's large and small operators, cross-network communication fees are extremely expensive, TRANSSION will launch dual-card dual-standby, or even four-card four-standby mobile phones to help users reduce tariffs.
There are also improvements aimed at the unique needs of African users. For example, TRANSSION has developed input methods for native African languages such as Hausa; the volume of mobile phones is huge, and some models come with headphones; and a "tanning" camera algorithm has been developed for dark-skinned people. These optimizations are not technically difficult, but they are very suitable for the pain points of African consumers.
In terms of channel selection, TRANSSION has gradually found a third way in addition to the traditional e-commerce, operator and retailer channels, which can be roughly summarized as roadside stalls, mom-and-pop shops and wall painting.
Commerce is still underdeveloped in most parts of Africa, and it is common for couples to set up roadside stalls to sell goods. Transsion's sales team visited these stalls one by one and put the mobile phone on the stall at a very low cost. Transsion also moved the marketing methods commonly used in domestic shopping malls such as smashing Easter eggs, giving gifts, and live performances to the streets of Africa, so that local consumers were refreshed.
In addition, Transsion has also developed some sellers into agents, allowing them to build their own teams and infiltrate into more regions. This further opens up a wider market that is difficult for TRANSSION to reach itself.
Over time, TRANSSION's network of African distributors gradually took shape. According to the prospectus, as of 2019, transsion has reached 360 African distributors, of which 72 have an annual sales revenue of more than 30 million yuan, contributing more than 76% to the revenue of The African region.
Wall painting is an advertising technique with Chinese characteristics, originally invented for health product companies, and later imitated by companies from all walks of life. Rumor has it that the wall painting has been moved to Africa, and the TECNO logo in white on a blue background appears in the streets of urban and rural areas. Anecdotally rumors have spread that Transsion's large-scale wall painting has even boosted local paint sales.
However, Transsion's marketing style is not blindly sinking. In addition to the earthy taste, it also attaches great importance to the introduction of African local star endorsement, which enhances the sense of intimacy while promoting the brand to break through upwards.
For example, in 2017, TRANSSION released a music mobile phone called Boom J8, inviting 18 stars from the Nigerian music scene to help, and the related topics were among the best on social media.
In addition, it has sponsored the Premier League's Manchester City and Leicester City, which in addition to their outstanding records, also have African stars such as Mahrez, Isinajo, and Ndidi, and have a large number of fans in Africa.
In contrast, although Samsung, Nokia and other companies laid out the African market earlier than Transsion, they still generally continue the global unified marketing strategy, and the advertising techniques on the top have caused a sense of distance, it is difficult to win African users, and the market share is gradually taken away by Transsion. Under the influence of multiple factors, the position of the "king of Africa" of Transsion has become more and more stable.
Xiaomi's African battle originally did not have to be fought.
There is no unified and sound market in Africa, and the turbulent situation and the backward level of social and economic development also restrict the growth of local consumption, which is a hard bone to gnaw. Xiaomi tested the African market twice in 2015 and 2019, but the results were not outstanding, and it was not unrelated to the objective environment.
However, in recent years, the proportion of Xiaomi's overseas business has become increasingly heavy. According to the financial report, in the third quarter of 2021, 52.4% of Xiaomi's revenue came from overseas markets; according to data from IDC and other institutions, Xiaomi's overseas sales accounted for nearly 3/4.
At the same time, Xiaomi faces many challenges in several major overseas markets.
In January last year, the TRUMP administration in the United States included Xiaomi in the securities investment blacklist, and the restriction was overturned four months later; at the end of the year, the Indian government conducted a large-scale tax inspection of Chinese mobile phone manufacturers, which once again sounded the alarm for Xiaomi.
It is worth noting that TRANSSION is counterattacking the Indian market. It introduced its low-cost brand Itel to India in April 2016 and set up a factory there, and has now expanded to more than 2,000 local distributors, accounting for more than 5% of the Indian smartphone market, ranking sixth.
For Xiaomi, going to Africa and doing a big job in the backyard of the transmission is becoming an increasingly attractive option.
Although it is inferior in terms of products, channels and other dimensions, Xiaomi is not without opportunities to expand the African market. The biggest variable is that the African mobile phone market is in the stage of migration from feature phones to smart phones, and smart phones are xiaomi's home field.
A research report released by Tianfeng Securities in July last year pointed out that the current penetration rate of mobile phones in Africa is only 48%, of which smart phones account for only 44%. In contrast, the penetration rate of domestic smart machines is as high as 97%.
TRANSSION has already laid out this, launched the mid-to-high-end product line Infinix, and the configuration and price have been greatly improved. However, due to factors such as brand, price, technology, and manufacturing, There is still a gap between Infinix's comprehensive competitiveness and Xiaomi and other first-line products.
Xiaomi smart phones go to Africa, which is expected to form a "dimensionality reduction strike". Of course, the premise is that Xiaomi can pull the price to a reasonable range, which requires the localization of supply chain and manufacturing.
On the other hand, the smartphone fights to the end, and the software ecology behind it is the fight. Xiaomi started from MIUI and has a lot of experience in this set of playing styles; and MIUI's global active users have exceeded 500 million, which helps Xiaomi quickly open up the situation in Africa.
However, TRANSSION has built a set of Internet software ecology in Africa through independent research and development, third-party cooperation, etc., with 8 APP monthly active users exceeding 10 million, including "African version of Douyin" Vskit, "African version of today's headlines" Scooper, etc. Among them, the number of music APP Boomplay users exceeded 100 million, making it the largest streaming music service in Africa.
This shows that it is not easy for Xiaomi to grab the African market from the voice, and the challenge is even more than when it first set foot in Africa in 2015.
Whether Xiaomi can occupy a place in the African market may still have to return to the foundation of its existence - cost performance. Nowadays, the infrastructure and sales channels of the African mobile phone market have developed significantly, and if Xiaomi reproduces the ultra-high configuration and ultra-low price of the start-up period, coupled with the advantages of global brands, it will have the opportunity to quickly grab the next market. After years of making money in Africa, Transsion will eventually usher in new opponents from China.
Resources:
Big Cat Finance, "Behind Xiaomi's 6.53 billion fines: Being the boss in India, you may really be punished for vomiting blood"
Observer Network, "Lei Jun and Indian Prime Minister Modi play selfie What signal does the two "India trip" release? 》
Tiger Sniff, How Voice 'Conquered' Africa
Zhixiang Network, "Xiaomi and OPPO 'invaded' Africa, can Transsion continue to be king? 》
FarKawa Technology Review, "Replicating China: Three African Adventures of Transsion"
People's Daily Online, "Passing on the Voice, Passing on the Good Voice to the World"