Tonight, Apple Will Follow The Path ... Xiaomi Has Already Been Following

Karamchand Rameshwar - Mar 25, 2019

Ironically, the company that regularly copied Apple had to witness its core business path followed by Apple. But between "Apple China" and "Apple US" there is a core difference that can change it all.

Even the revival of the iPad Air and iPad Mini or the next version of the AirPods is not as important as the streaming service about to be launched by Apple. All three hardware products have been quietly launched ... on Apple website, giving way to the video playback service (and news) taking the most important position in the event on March 25th.

Apple followed ... Xiaomi

It is not difficult to understand why this event is so important to Apple: when the market for the iPhone is saturated and slightly reducing, its hardware business will turn into a great launcher for software and service to boost. In the most recent quarter, the iPhone maker's service segment hit $ 10.9 billion in revenue, surpassing all hardware categories except for the iPhone.

Http Mashable Com Wp Content Uploads 2016 04 Lei J — The slogan "Internet Company" has been repeated by Lei Jun since the early days of Xiaomi.

Ironically, using hardware as a launch pad for software is also a strategy that has been mentioned by Chinese Apple - Xiaomi. Last June, just before the IPO in Hongkong, Xiaomi reaffirmed that it would never take more than 5% of the profit from hardware. Xiaomi's goal is to become an "Internet company": Sell low-cost, "high-quality" smartphones with low-profit margin, and then cash out by providing Internet services. In Xiaomi's eyes, the Redmi, Mi or Poco phones are just the door to revenue from software and network services.

Since the beginning of the year, the US-based company has repeatedly mentioned similar points. When announcing financial results for the fourth quarter, it made investors eager to announce that the number of iPhones being used regularly has reached 900 million. These 900 million handsets will not bring in new hardware revenue, but it is the door for users to come to the upcoming App Store, Apple Music or streaming video and news services.

Core Differences

Apples Iphone Lineup For 2018 810x506 155323225536 — There are 900 million iPhones circulating in the market, creating huge potential for content services.

It is true that Apple is following the path that has been outlined by Xiaomi at the beginning, but between "Apple China" and "Apple America" there is a core difference that can change everything: Apple only sells high-end products.

During the 10-year history of App Store and Google Play stores, this difference has always created a paradox: the number of downloads or the number of users on Android is always overwhelmingly high compared to iOS, but in terms of sales, iOS always comes out on top. Even the profit Apple and developers get from the App Store is twice as high as Google Play. Turns out, because iPhone users are too financially available, they are also willing to spend more money on the apps.

With Xiaomi, this difference is more serious: the majority of Xiaomi users focus on the very low price segment. In 2018, an average buyer spent only 150 USD to own a Xiaomi smartphone, equal to one-fifth of the amount Apple fans spent to buy the iPhone. Using hardware as a service launcher of Xiaomi meets a huge obstacle when the user group they focus on are generally not financially strong for digital services.

Dscf7206 1523257155981103707714 Crop1523257159864p — Ability to pay of Xiaomi’s users is much lower than iPhone users.

Worse, Xiaomi cannot build an Internet service empire like the company it has been copying. Much of Xiaomi's service revenue comes from advertising inside utility apps that Xiaomi has pre-installed on the phone. The remainder comes from apps, video, music, news services ..., but these segments are subject to too much competition from Android's boss, Google.

On the opposite side, iOS is fully owned by Apple. No need for advertising revenue as revenue from apps, music, movies, etc., was more than enough for the company to build a $ 10 billion service empire.

Stats don’t lie

Stats don’t lie, and they're still against Xiaomi's "Internet company" vision. When IPO, Lei Jun breezes that MIUI has 190 million users monthly. These 190 million users only give Xiaomi $ 2.4 billion in service revenue in 2018. In other words, Xiaomi's annual service revenue is equal to 1/4 of Apple's service revenue in 1 quarter.

Xiaomi Mi Music India 15532328456471877206406 1 — With Xiaomi's limited potential, building a service empire is nearly impossible.

Want to be successful in this service business, Xiaomi will face the challenge that both Netflix or Spotify are facing: spending a huge amount of money to build a strong base and then move towards long-term profit. But Xiaomi's cash reserves are only $ 5 billion while Apple has $ 250 billion, how can Xiaomi build an empire like Apple?