Editor | Jiran

Xiaomi is shedding its cost-effective label and becoming increasingly expensive.

On October 29, Xiaomi held a new product launch event, with the pre-sale price of the newly released Xiaomi SU7 Ultra reaching 814,900 yuan, compared to the previously released Xiaomi SU7 standard version priced at 219,000 yuan. Meanwhile, the starting price of the new Xiaomi 15 reached 4,499 yuan. Compared to the previous Xiaomi 14's starting price of 3,999 yuan, this represents an increase of about 500 yuan.

Lei Jun once joked that Xiaomi fans should cherish the Xiaomi flagship priced at 3,999 yuan, as such prices would no longer be available in the future. Many Xiaomi fans joked, "We're just getting older, not richer."

In the past, "cost-effectiveness" has been the soul of Xiaomi, but in recent years, Xiaomi has begun moving towards high-end products, with prices of both phones and cars on the rise, gradually making them unaffordable for young people.

So, why is Xiaomi pursuing high-end products? What does it have to rely on for this? And what challenges will it encounter on this path?

01

The Unaffordable Xiaomi

At Xiaomi's recent new product launch event, the most talked-about products were the Xiaomi SU7 Ultra and Xiaomi 15.

During his speech, Lei Jun laid the groundwork for the eventual announcement of the Xiaomi SU7 Ultra's price.

He first evaluated the car as the highest-end and most powerful model in the Xiaomi SU7 series, claiming it to be the fastest four-door mass-produced car on the planet.

Indeed, the Xiaomi SU7 Ultra boasts a maximum horsepower of 1,548 PS, a 0-100 km/h acceleration time of just 1.98 seconds, and a top speed of 350 km/h, making these specifications very eye-catching.

Then Lei Jun repeatedly emphasized that the Xiaomi SU7 Ultra would not be cheap, that it was a bit expensive, and compared it to the Porsche Taycan Turbo GT, claiming that it was "comprehensively superior."

When the price was finally announced, there was only sparse applause from the audience, creating an awkward scene. The excited cheers that greeted the announcement of the Xiaomi phone 1's 1,999 yuan price were no longer heard.

Some netizens joked, "Now that Porsche's prices have fallen below 400,000 yuan, if you can't afford the Xiaomi SU7 Ultra, you can buy a Porsche as a transition." "Once ignored Xiaomi, now unable to afford it."

A considerable number of people are also questioning whether Xiaomi has lost touch.

Lei Jun anticipated these questions. During the event, he said his real concern was whether Xiaomi's carefully prepared products were "worth the price? Did they really exceed people's expectations?"

Whether they are worth it or not will only be clear after the cars are delivered and truly experienced.

Apart from cars, Xiaomi's phones are also becoming increasingly high-end. At this event, Lei Jun stated: "Xiaomi's high-end strategy has been implemented for five years, with five generations of products released. The Xiaomi 15 announced today will be the most fluid, exquisite, and well-crafted small-screen flagship ever."

In this digital series, the Xiaomi 15 starts at 4,499 yuan, while the Xiaomi 15 Pro starts at 5,299 yuan. Most statistical agencies define models priced over 600 USD (approximately 4,281 yuan) as high-end. This means that all Xiaomi digital flagship phones have crossed the high-end threshold.

Mumu (pseudonym) is a die-hard Xiaomi fan who has supported Xiaomi since the first generation. In the past two years, Mumu has noticed that Xiaomi products are becoming increasingly expensive, and he wonders why, given that Xiaomi was known for its high cost-effectiveness. Is selling at such high prices drifting further away from its original intentions?

In fact, Xiaomi's high-end strategy began as early as 2020 with the Xiaomi 10 series's first foray into the high-end market. In 2022, Xiaomi officially made high-end products a group strategy, aiming to compete directly with Apple. In last year's personal speech, Lei Jun even stated that "Xiaomi's path to high-end products is not only necessary but also a matter of survival."

From a data perspective, in the first quarter of 2024, Xiaomi's high-end smartphone shipments accounted for 21.7% of its overall smartphone shipments, an increase of 1.4 percentage points year-on-year. Canalys data shows that Xiaomi's market share in the global high-end market was 2% in the second quarter of 2024, a year-on-year increase of 71%.

This means that Xiaomi is moving faster and faster towards high-end products, which is commendable. However, it is also moving further away from its cost-effective label.

So, why is Xiaomi determined to pursue high-end products despite the risk of being questioned or even abandoned by a large number of fans?

0

Why Pursue a High-End Path?

Every company is like a ship sailing in the tides of the industry. As the tides turn, companies must also change course.

One of the main reasons Xiaomi is determined to pursue high-end products is that it is becoming increasingly difficult to tap into new market growth.

Since 2017, as smartphone penetration rates peaked, most consumers have become less enthusiastic about upgrading their phones, leading to fewer market growth opportunities. In 2022, China's smartphone market shipments fell 13.2% year-on-year, the largest decline ever recorded at that time.

Despite the slowdown, the high-end phone market has continued to grow. In 2022, high-end phone sales bucked the trend, growing by 1%, and contributed more than 55% of global mobile phone market revenue for the first time.

It was also in this year that Xiaomi elevated its high-end strategy to a group-level strategy. For Xiaomi, continuing on the cost-effectiveness path would lead to increasingly slim profits, undoubtedly pushing it into a dead end.

Moreover, consumers have grown tired of the selling points of mid-to-low-end phones. Xiaomi must create more selling points and innovate to attract more consumers through high-end products.

Furthermore, competitors like Huawei, OPPO, and vivo are all pursuing high-end strategies, and Xiaomi risks falling behind if it doesn't follow suit.

Therefore, Xiaomi's pursuit of high-end products is indeed a necessary path and a battle for survival.

Since the beginning of this year, the smartphone market has shaken off its downward trend and achieved growth: According to TechInsights data, global smartphone shipments reached 307.7 million units in the third quarter of 2024, a year-on-year increase of 3.8%, marking the fourth consecutive quarter of recovery.

However, the overall market growth rate is still significantly slower compared to the past. And TechInsights predicts that the growth rate will drop to 2% in 2025. Fortunately, the high-end phone market continues to perform well, becoming a goldmine for major phone manufacturers to tap into growth. According to IDC data, in the third quarter of 2024, China's smartphone market shipped approximately 68.78 million units, of which high-end phones accounted for 29.3% of the market share. Therefore, major domestic phone brands have collectively raised prices this year, further pushing the path to high-end products: PConline statistics reveal that compared to the previous generation, vivo X200 series prices increased by 300 yuan across the board; OPPO Find X8 series prices increased by 200 yuan; Honor Magic7 prices increased by 100 yuan; Xiaomi 15 saw the largest increase, with prices rising by 200-300 yuan and the starting price increasing by a full 500 yuan.

Another reason why phone manufacturers are obsessed with the high-end path is that they have indeed tasted the sweet rewards. Canalys data shows that in the second quarter of 2024, the top five vendors in the global high-end smartphone market (above 600 USD) all achieved year-on-year growth in shipments.

In particular, Xiaomi has gained market growth through its high-end strategy, further enhancing its market position. During the recent launch event, Lei Jun stated that Xiaomi's second-quarter performance increased by 32% year-on-year, and its phone products remained in the top three in global shipment rankings.

In the automotive sector, Goldman Sachs predicts that Xiaomi SU7 Ultra will sell 4,000 units next year, contributing 5% of automotive business revenue. According to Lei Jun, pre-orders for the SU7 Ultra exceeded 3,680 units within 10 minutes of its launch.

Capital institutions have also boosted their confidence in Xiaomi, with Goldman Sachs and Citibank both raising their target price for Xiaomi to 30 Hong Kong dollars per share. Goldman Sachs expects Xiaomi to continue achieving year-on-year recovery in revenue and shipments in 2024 and to maintain stable gross profit margins and operating profit margins through high-end products and internet revenue growth; Citibank emphasized in its report that Xiaomi's market share in the high-end phone and automotive segments is expected to further increase.

Indeed, the high-end strategy has opened up new growth opportunities for Xiaomi in an era of stock , demonstrating the possibility of new development through iterative upgrades.

So, who is paying for high-end Xiaomi products?

Many believe that not many people will buy the SU7 because the wealthy may not consider it, and Xiaomi fans may not be able to afford it. Surprisingly, it has been in high demand.

In fact, one reason that cannot be ignored is that Xiaomi is becoming increasingly appealing to women.

A consumer ranking circulating online goes: Women > Children > Elders > Pets > Men, highlighting women's significantly greater spending power. Xiaomi was once considered a "straight male brand," but it is now increasingly catering to women in its design. For example, Lei Jun revealed that the first requirement for Xiaomi SU7's design was aesthetics and storage, and over 40% of Xiaomi SU7 users are female, with actual female drivers accounting for nearly 50%.

At this new product launch event, Xiaomi 15 introduced a custom color version with 20 color options and 40 combinations. Some netizens commented that Lei Jun has once again targeted women's hearts and wallets.

03

Challenges on the High-End Path

Despite smooth progress in its high-end strategy, it is not easy for Xiaomi to tell its high-end story well. Facing the future, it still faces various challenges.

The first challenge is fierce competition.

After the launch of Xiaomi 15, Xiaomi successfully crossed the 4,000 yuan threshold, with the next high-end milestone being 6,000 yuan and above. At that point, Xiaomi's biggest competitors will be Apple, Samsung, and Huawei.

Apple and Samsung have firmly established their competitive advantages in the high-end market. From a global high-end market share perspective, Apple accounts for 62%, Samsung for 22%, Huawei for 9%, and Xiaomi for only 2%. In the short term, it will be difficult for Xiaomi to gain significant growth in competition with strong rivals like Apple and Samsung.

Its real competition lies with Huawei.

From 5G technology to self-developed Kirin chips and HarmonyOS, each technology helps Huawei solidify its position in the high-end market. Additionally, in the full-scenario field, Huawei also attempts to establish a high-end mindset among users in five major scenarios, while Xiaomi lags slightly behind Huawei in technology.

Furthermore, in terms of brand culture, Huawei carries a sense of national sentiment, making its high-end path smoother. In contrast, Xiaomi is heavily labeled as "cost-effective" and "mid-to-low-end," making it difficult to change consumer perceptions in a short time.

According to Trout's "Positioning" theory, positioning is not about what the product should do but about what the intended user should perceive. In other words, the brand must position the product in the minds of the intended users to ensure that it occupies a truly valuable position. What Xiaomi needs to do now is truly establish a high-end position in the minds of users.

To truly achieve this, technological innovation is essential.

Observing Xiaomi's entire launch event, it is evident that Xiaomi wants to convey to the outside world that its high-end strategy is based on technology rather than just marketing.

For example, Lei Jun emphasized that Xiaomi expects to invest over 24 billion yuan in research and development this year, with an expected investment of 30 billion yuan in 2025, continuously investing in underlying technologies such as AI, OS, and chips.

Xiaomi also stated that the Xiaomi SU7 Ultra is equipped with the Xiaomi Super Motor V8s, independently developed and produced by Xiaomi, which is currently the fastest and most powerful mass-produced main drive motor. The Xiaomi 15 series uses Xiaomi's new M9 luminescent material, featuring a unique double-layer microcavity luminescent structure that reduces screen power consumption by 18% and increases luminous efficiency by 8.5%.

Of course, we are optimistic about Xiaomi's high-end path, which is undoubtedly driven by technology.