Thread by @therealjpk

1/ The world’s 3 largest smartphone companies currently are Apple, Samsung, and Xiaomi. Apple is 45 years old. Samsung is 83 years old. And Xiaomi? Just about 10 years old.

2/ It is not only the world’s 3rd largest smartphone seller, but was one of the youngest companies to make it to the Fortune 500 list with revenues of $37.7 billion (2020) and profits of over $2 billion.

When Xiaomi started out, China was a battlefield of over 400 brands.

3/ How did Xiaomi break out? I read dozens of books, spoke to industry experts, and pieced together a book on Xiaomi’s rise. A thread on the market conditions then and a short tech history lesson.

The story begins with a small family enterprise in Chicago, not Beijing.

4/ This family enterprise was known as Galvin Manufacturing Corporation. Today, it is called Motorola. It began in 1928 as a humble family operation led by Paul Galvin.

In the early seventies, relations between the US and China began to open up.

5/ Motorola had won a deal to set up a cellular system in China that year. At a function, Paul’s son Bob Galvin broke protocol and talked to the minister of railroads about setting up manufacturing in China.

6/ Motorola played a huge role in training the Chinese workforce in electronics manufacturing. Around the same time, Taiwanese businesses were also set up in China for their cheap labor.

Motorola grew rapidly in the US and Chinese manufacturing was great for the company.

7/ In 1994, the company clocked $22 billion in revenues with $2 billion in profits. Galvin’s gamble had paid off.
Finnish phone maker Nokia entered China in 1985 to set up manufacturing and R&D. The Nokia 1011 came out in 1992 and it gained market share.

8/ In 1998, it signed a deal with China Postel, the country’s largest phone distributor and became the world’s largest mobile phone seller.
The turf war continued and Motorola and Nokia made phones to sell mostly in the US and UK.

9/ But now local Chinese manufacturers were getting better at making electronics.
The next decade, 2000 - 2010, would change everything. China’s economy grew fivefold from $1.21 trillion to $6.09 trillion.

10/ The middle kingdom was well on its way in the latter half of the noughties to becoming the world’s second-largest economy and had rapidly lifted over 300 million people out of poverty into the middle class.

11/ As domestic demand for mobile phones grew exponentially, companies such as Nokia and Motorola found it increasingly difficult to send products to remote rural areas.

12/ The sudden spurt in demand had been a pleasant surprise but one that none of these companies was prepared to meet.

13/ The phones that were being manufactured were not customized for Chinese users (such as language settings, wallpaper, or even lunar calendars), and Chinese consumers craved alternatives. Motorola and Nokia’s fortunes declined (more on this later).

14/ In 2007, the iPhone was launched. Soon Android came out. The telecom industry would never be the same. China’s demands were being met by foreign brands at the upper end and Shanzhai phones at the lower end.

15/ Nearly 300 brands existed in China, thanks to a super cheap MediaTek chip that design houses could build smartphones around. The market was ripe for a credible alternative.

But that is not all.

16/ It took some very persistent entrepreneurs, borderline obsessive behaviour, savvy marketing and a thorough understanding of the new generation of Chinese buyers for a company like Xiaomi to succeed against the odds.

Xiaomi’s playbook is a delight to decode (More soon).

17/ It is as if someone has masterfully knit together a future-proof strategy, carefully picking elements from many different industries and backed it with heads-down execution. More threads on these soon.

18/ To read more about the book and pick up a copy, head to therealjpk.com.