Perhaps, it’s about time, maybe it’s inevitable. When Apple, Huawei and Samsung, three out of the five largest smartphone vendors in China are already designing handsets using their own processors, Xiaomi figures it’s time to go vertical.
Xiaomi wants its own custom-designed processors to differentiate its products and control its destiny, an executive of Leadcore Technology told EE Times.
Rather than putting together an in-house chip design team, Xiaomi chose Leadcore, a fabless chip company […] as its partner to source the technology. […]
Leadcore is working with China’s fastest growing smartphone company on “all three different levels — product, technology and patent,” Marshal Cheng, vice president of Leadcore explained […].
Cheng calls Xiaomi’s strategy shift “inevitable,” based on volume (Xiaomi shipped 61.12 million units in 2014 by the company’s own account) and the need to differentiate.
It’s not clear how deep this is, but it’s noteworthy. The bigger question: is customization the right approach for Xiaomi? If this is aimed at improving Xiaomi’s low-cost position (e.g., relative to Apple), then it may be a good move. If it’s aimed at differentiating (power, performance) against other cheap rivals, or against Apple, then it’s probably just adding time-to-market risk in return for little benefit.
In other words, it makes more sense for Xiaomi to strengthen its “moat” — low cost and, recently, scale – than it does for it to try and out-differentiate Apple. To-date, Xiaomi has not tried to differentiate against Apple. If it were, the last thing it would do is emulate Apple’s industrial design, OS look-and-feel, and keynote events. Instead, it has aimed to deliver a spec-competitive offering at a lower price. If history is any indicator, its deal with Leadcore is cost-focused, intended to deliver lower retail prices – at levels Apple won’t reach.
In terms of differentiating against Android competitors Samsung, Lenovo, Huawei, LG, and ZTE, it’s not likely that chipset differentiation is the factor that would help set Xiaomi apart. It’s certainly not a factor for Samsung and Huawei, who dabble in custom chipsets today. (If anything, image quality would be a more discernable attribute.) Conversely, Xiaomi’s low retail prices — derived by its use of online distribution and low internal cost structure – *have* helped it significantly. While its intent with Leadcore is not clear, it’s certainly plausible that Xiaomi seeks to sustain its ability to deliver low prices. Specifically, it might work with Leadcore to design chipsets that reach lower price points, faster, relative to what competitors can achieve.
You’ll see reference to volume support and IP protection in the article. Those are valid needs that Xiaomi has. But they’re not the drivers of the customization aspect.
Update: I updated this post to include the next-to-last paragraph.