China’s Xiaomi to Take On Top Tier With Smartphone Chip of Its Own-
China’s Xiaomi to Take On Top Tier With Smartphone Chip of Its Own
Struggling at home but with global aspirations, it looks to join the likes of Apple, Samsung and Huawei
Source:WSJ
A Xiaomi store in Beijing in October; the company is set to launch its first phone powered by a processor of its own. PHOTO: QILAI SHEN/BLOOMBERG NEWS
Thursday, February 9, 2017 8:39 AM EDT
BEIJING—China’s Xiaomi Corp. plans to introduce a phone powered by a custom-made microprocessor, people familiar with the matter say.
It is a sign of Xiaomi’s drive to stand out in its highly competitive home market and of its aspirations to join the top tier globally. Chinese companies are putting increasing effort into developing their own technology to differentiate themselves and offer phones whose hardware and software together work more seamlessly.
Xiaomi aims to release its “Pinecone” processor within a month, one of the people said. It would become China’s second smartphone maker, after Huawei Technologies Co., to produce phones with its own processors.
Developing chips internally makes sense for top-tier electronics makers, said Sean Yang, Taiwan-based research director with tech research firm TrendForce.
“A phone maker can only reach the pinnacle of user experience when optimizing the integration of hardware and software on its own,” said Mr. Yang.
Developing its own chip and related technology could also insulate Xiaomi from supply-chain disruptions. In India, the company’s most-important overseas market, it could bring one other benefit as well. Xiaomi now uses chips from San Diego’s Qualcomm Inc. in high-end phones, and Taiwan’s MediaTek for budget models—but a patent dispute in India limits it to Qualcomm-powered models there.
The question is whether Xiaomi’s processor can rival those of other smartphone makers with chips of their own— Apple Inc., Samsung Electronics Co. and Huawei Technologies Co.
“It’s risky,” said Mark Li, an analyst at Bernstein Research. “The resources required to develop competitive mobile chips are high.”
Xiaomi, which led China in smartphones sold in 2015, last year slipped to fifth place behind Oppo Mobile Telecommunications Corp., Huawei, Vivo Electronics Corp. and Apple, according to research firm International Data Corp.
Xiaomi has been tight-lipped about its processor developments, although a website and verified social media account for the new chip company recently appeared. Xiaomi’s chip technology is built on a foundation from Chinese state-backed Datang Telecom.
In November 2014, a new Xiaomi-linked private entity, Beijing Pinecone Electronics, paid 103 million yuan ($15 million) to acquire mobile processor technology from Datang subsidiary Leadcore Technology Ltd., according to a stock exchange filing. The two companies planned to jointly design mobile chips, the filing said.
Beijing Pinecone Electronics is the entity that Xiaomi set up to develop its in-house smartphone processor chipset, according to one of the people familiar with the matter. A regulatory filing shows Beijing Pinecone Electronics has an equity pledge agreement with Xiaomi.
A recent component crunch in the global smartphone market has underscored the potential advantages of an in-house supply. Supply-chain executives say unexpectedly brisk demand has left smartphone makers scrambling for parts.
Still, it is unclear if Xiaomi can find an edge. Apple, which has its own operating system, and Huawei, which has decades of experience making network equipment, are the leaders in self-developed chips, said Wang Yanhui, secretary-general of the Mobile China Alliance.
—Yang Jie and Eva Dou