Xiaomi relying on 5G tech for demand as shares slump

Xiaomi recently announced plans to give its bargain “Redmi” label more prominence so it can begin to raise prices and specs on its flagship Mi gadgets. Photo: Bloomberg

Xiaomi Corp.’s billionaire co-founder, shrugging off a share slump that wiped $6 billion off its market value in just three days, expects the advent of next-generation wireless to energize demand for its smartphones.

The Chinese devices maker is now focusing on pushing upmarket while expanding into Europe, forgoing the US, Chief Executive Officer Lei Jun told Bloomberg Television. He didn’t outline his reasons for avoiding the world’s largest economy, once deemed a promising arena for Xiaomi but now increasingly hostile to Chinese corporations.

On Thursday, Xiaomi announced plans to give its bargain “Redmi” label more prominence so it can begin to raise prices and specs on its flagship Mi gadgets. That effort to elevate its name comes as the smartphone boom plateaus and China’s economy decelerates. But rivals such as Huawei Technologies Co. have already claimed a share of the higher end of the market, encroaching on Apple Inc.’s turf.

While Lei declined to comment on how an economic deceleration might affect his business, he did say 5G will revive not just demand for smartphones, but also the internet services Xiaomi hosts. They now run the gamut from online music to movies and serve, collectively, some 220 million users.

“In China, the penetration rate of smartphones is extremely high,” Lei said in an interview. “But I think we are at the eve of 5G. I believe when 5G phones start to get popular, the overall demand from China will recover.”

Xiaomi shares rose 2.1% to HK$10.18 as of 11:21 am in Hong Kong. The stock is 40% below the price in July’s initial public offering and shed 17% in the past three days after a post-IPO lockup on billions of shares was lifted. Several analysts cut their price targets or estimates on the former high-flier this week. Once touted as an internet company that can command a value of as much as $100 billion, Xiaomi is now worth roughly a third of that.

In the wake of Apple’s shock outlook-cut last week, CLSA slashed its forecast on Xiaomi’s shipments by 15% to 135 million units this year — lagging Huawei but ahead of local rivals including like Oppo.

To be sure, it’s come a long way since its inception. Shareholders who’ve owned a piece of the company since its first funding rounds can pocket a fat profit. Some 3.9 billion shares bought in a round of funding that started in 2010 cost less than two Hong Kong cents each, according to the company’s prospectus.

“Over the past two to three years, we have entered about 80 countries and regions,” Lei told reporters at an earlier roundtable. “I hope the momentum continues.”

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