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China tech

Xiaomi seeks fans in Japan with budget-friendly phones

Chinese manufacturer taps new market abroad as Huawei eats its lunch at home

Xiaomi's Steven Wang says the company is ready to make a push into Japan with the start of 5G service in the country. (Photo by Kai Fujii)

BEIJING/TOKYO -- Xiaomi is bringing its low-cost, high-performance smartphones and an array of connected devices to the Apple-dominated Japanese market, part of an effort to bolster its business abroad as it stumbles in its home market of China.

The world's fourth-largest smartphone maker announced the move on Dec. 9. It has begun taking preorders on Amazon Japan for its flagship Mi Note 10. The handset, which features five rear cameras and a 108-megapixel sensor, will cost 52,800 yen ($486) for a 6-gigabyte model.

That is less than half the price of competing phones, according to Steven Wang, general manager of Xiaomi's East Asia operations.

Japan "is making preparations for full-fledged commercialization of [fifth-generation wireless], so this is the perfect opportunity to enter" the market, Wang told Nikkei in an interview.

Xiaomi will also sell such "internet of things" products as a fitness tracker and a remotely controllable rice cooker with a 9,999 yen price tag.

It will offer a broad lineup of internet-of-things devices to expand the Xiaomi ecosystem, Wang told reporters in Tokyo.

A focus on value for money is among Xiaomi's main selling points. Chairman and CEO Lei Jun said before its 2018 initial public offering that the company would limit its profit margin on hardware sales to 5%.

Xiaomi devices are around 30% to 50% cheaper than comparable products from Huawei Technologies, the world's No. 2 smartphone maker. And with Huawei at risk of losing access to updates to Google's Android operating system amid the Sino-American trade war, some analysts expect consumers to look for alternatives.

Xiaomi is turning more attention abroad as its market share in China shrinks and the nation's economy cools. Its smartphone shipments in China dropped 30% or so by volume on the year in the quarter ended September, while Huawei's jumped around 60% and Xiaomi's global shipments fell 3%.

Its foreign operations are faring better. Revenue from outside China grew 17% on the year last quarter, making up nearly half Xiaomi's total.

Internet-connected appliances also generate a growing share of its business. While revenue in Xiaomi's smartphone segment slid 8% last quarter, its internet-of-things and lifestyle products segment logged a 44% rise, growing to 30% or so of total revenue. The company leads the Chinese market for flat-panel televisions, drawing young consumers who see them as a bargain.

Xiaomi ranks among the top five smartphone makers in 42 markets, according to Wang, who told Nikkei that it aims to achieve that status in Japan as well.

"The Japanese market is the most developed in Asia," he said. "Consumers have high standards for products, so succeeding in Japan will raise our profile."

But breaking into a market that is solidly iPhone country will not be easy. Apple holds half the smartphone market in Japan, and the iPhone is a centerpiece of carriers' efforts to lure subscribers.

"Xiaomi's growth will hinge on its success in Japan, a leading developed economy, especially because the trade war has made it hard to enter the U.S.," a Chinese securities analyst said.

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