After becoming the third largest smartphone vendor in the world in 2014, Xiaomi is looking to continue the momentum by setting itself a sales target of 100 million units. To do so, Xiaomi will focus more on its home market as well as India — which the vendor mentioned as its largest overseas market — before setting its sights on the West.

With devices like the Mi 3, Redmi Note and Mi 4, Xiaomi managed sales of 61.1 million in 2014. One of the main reasons for Xiaomi’s success was the remarkably low pricing of its handsets, which were sold at near manufacturing cost. Xiaomi’s global VP Hugo Barra mentioned that the Chinese brand was able to do so as it does not have any significant overhead in terms of marketing and advertising. All Xiaomi products are sold online in a flash sale model, and advertising for the brand is done solely through social media. The model seems to be working very well for the vendor, as it has over 10,50,000 fans on China’s Weibo microblogging service.

Xiaomi hits 100 million sales

Xiaomi will be looking to improve upon its sales numbers with the likes of the Mi Note and Mi Note Pro. Unveiled last month in China, both handsets are a departure from Xiaomi’s previous handsets in that they both feature glass backs. The 2.5D curved glass at the front and 3D glass surface at the back are both protected by Corning’s Gorilla Glass 3, with the bezel at the front a mere 3.0mm. While the resolution of the 5.7-inch Mi Note is at full-HD, Xiaomi has mentioned that the panel used for the device offers adaptive dynamic contrast as well as a night mode that reduces glare in low-light conditions.

In terms of hardware, the Mi Note offers a quad-core 2.5 GHz Snapdragon 801 SoC that features an Adreno 330 GPU, 3GB RAM, 16/64GB internal storage, dual-SIM connectivity, 24-bit/192KHz lossless audio playback, 13MP camera (IMX214) with OIS, 4MP front camera and a 3,000mAh battery.

The Mi Note Pro — as the name suggests — is the beefier of the two, and features a 5.7-inch 2K (2560 x 1440) display, 64-bit octa-core Snapdragon 810 SoC, an astounding 4GB LPDDR4 RAM, 64GB internal memory based on the eMMC 5.0 standard, 13MP rear camera, 4MP front camera and LTE Category 9 connectivity along with a 3,000mAh battery.

The Mi Note is available for sale in China with prices starting at $370, while the Mi Note Pro will go on sale later this month at $530. During the initial months of a device’s launch, Xiaomi does not make a significant amount of money from sales, but as the lifecycle of the handset wears on and the cost of the components used comes down, the vendor manages to eke out a small margin. This is why all of Xiaomi’s handsets are manufactured have a limited production run as that decreases overall cost incurred.

Going after Apple in China

After targeting the likes of Samsung (KRX: 005930) and Lenovo (HKG: 0992) in its home markets, Xiaomi has raised the bar and is now setting its sights squarely on Apple, and the iPhone 6 Plus. Apple’s (NASDAQ: APPL) larger iPhone debuted in China to great success, with demand for the device far greater than supply.

Xiaomi called out Apple on several occasions during the launch of its latest handsets, making a reference to how the camera sensor on the Mi Note sits flush on the body, unlike the iPhone 6 Plus and iPhone 6. Xiaomi also revealed how it was able to fit a screen that’s 0.2mm larger than what is on offer with the iPhone 6 Plus in a body that is thinner by 0.15mm.

The first few flash sales of the Mi Note have concluded, with the device selling out in mere minutes, which is essentially what is to be expected of a Xiaomi flash sale these days. A device’s success does not depend only on the hardware, however, and in terms of software, Xiaomi is looking to step up its efforts.

Both the Mi Note and Mi Note Pro come with the latest version of Xiaomi’s operating system, MIUI 6. With over 100 million global users, MIUI began life as a custom Android ROM, and is installed as standard on all Xiaomi devices. The latest iteration bears a slight resemblance to iOS 7, but there is a wide chasm when comparing the experience offered by the two operating systems. MIUI 6 offers a combination of settings and functionality that is geared at novice users as well as power users. The plethora of settings that allow users to customize all facets of the operating system are cleverly hidden away so as not to overwhelm new users to the ecosystem.  Xiaomi offers its own suite of software services, and with the Play Store banned in China, these are the main gateway for Chinese consumers to access mobile services.

Building a lifestyle brand

Xiaomi is known for its handsets, but the brand wants to be much more than that. By offering TVs, routers, smart home products and even air purifiers, Xiaomi is looking to become a lifestyle brand, with Barra stating as much during his MWC keynote. Xiaomi is looking to build an ecosystem of services and products that integrate with the vendor’s software offering, MIUI. Doing so will prove to be a challenge, but given Xiaomi’s loyal fanbase, most of whom are in their mid-twenties, as well as the brand recognition it commands in China, venturing into the IoT market as well as exploring new territories.

At a media event held in San Francisco on February 12, Xiaomi has announced that it will be launching its Mi.com store in the US later this year, through which the vendor will offer accessories such as the $15 Mi Band fitness tracker, Mi piston headphones and the Mi power banks. At Mobile World Congress in Barcelona, Xiaomi announced that it would be launching the accessory store in Europe as well. The goal behind making accessories available to customers in Westerns countries is to get feedback from a wider audience base and generate interest in Xiaomi as a brand.

With stellar handsets and a move into wearables, action cameras and smart home products, Xiaomi is trying for the first time this year to achieve vertical integration: tie in different products with a single software experience.

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Xiaomi’s newly launched 5.7-inch flagship smartphone – Mi Note – seemed to help boost several Taiwanese contractors’ business.

On Jan. 15, Xiaomi unveiled the Mi Note flagship smartphone that features ultra-slim design, a more powerful processor, improved cameras and better display resolution.

Priced at US$412 for the Mi Note Pro and US$372 for the Mi Note in China, the former sports Qualcomm’s Snapdragon 810 chipset, 4GB of RAM, and a quad HD display, while the latter is equipped with the Qualcomm Snapdragon 801, 3GB of RAM, and a full HD display. The Chinese smartphone maker also touted the fact that unlike the iPhone 6 variants, the rear camera sits flush with the phone’s body, and does not protrude like the American flagship.

“The newly debuted flagship model is evidence of Xiaomi’s strategy to expand its product portfolio in 2015,” said Jasmine Lu (呂智穎), a Taipei-based analyst with Morgan Stanley. “Competition is intensifying in China and overseas expansion will take time to bear fruit, but we believe Xiaomi can still outgrow peers via a broader mix.”

Lu, meanwhile, estimated that Xiaomi will begin its mass production of the Mi Note sometime in February or March, with shipments forecast to total eight million to 10 million units during the whole product cycle.

Xiaomi sold a total of 61.12 million units of smartphones in 2014.

The analyst said that FIH Mobile (HKG: 2038), a unit for Taiwanese contract electronics maker Foxconn Technology Group (TPE: 2354) and one of Xiaomi’s suppliers, will benefit from a higher average selling price for casings and will gain about 50% of the assembly orders.

“This means that Xiaomi is expected to contribute around 13% of FIH’s total revenue in 2015 and more than 45% of its gross profits this year,” she said.

Lu also named FIH and Hong Kong-listed AAC Technologies Holdings Inc (HKG: 2018), the main sources of Xiaomi’s acoustic and RF solutions, as the top two picks in Xiaomi’s supply chain and maintained an “overweight” rating on both stocks.

One of the Mi Note’s highlights is its 13-megapixel rear camera equipped with Sony’s IMX214 sensor. The Note’s camera selection represents a potential boon to a lot of Taiwanese suppliers, including Sunnic Technology and Merchandise, a partnering distributor of Sony (TYO: 6758) parts and modules, camera lens maker Largan Precision (TPE: 3008), camera module makers Primax Electronics (TPE: 4915) and Lite-On Technology (TPE: 2301), and electronic manufacturing service provider Inventec (TPE: 2356).

Display panel suppliers Wintek (TPE: 2384) and TPK (TPE: 3673), however, will not be included in the list of Taiwanese companies set to benefit from Xiaomi’s phablet sales although these two screen and touch panel manufacturers have been Xiaomi’s partners since 2013, now that Xiaomi decided to commission Japanese competitors Japan Display (TYO: 6740) and Sharp (TYO: 6753) for the job.

In order to achieve the Mi Note’s 7-mm thickness, which is 0.1-mm thinner than the iPhone 6 Plus, Xiaomi had adopted the in-cell touch display technology made by the Japan Display and Sharp, over TPK’s touch-on-lens and Wintek’s on-glass-solution.

Xiaomi observed a sales drop during the fourth quarter last year. The sales drop was related to its then-supplier Wintek’s being beleaguered by ailing financial condition and is in the midst of a restructuring process. The Taiwan-based touch panel maker supplied touch panels for both Apple and Xiaomi. In an attempt to vie more orders, Wintek invested large sums of funds to increase its production yield. Much of the funds were used to build new facilities in Dongguan, China, and Vietnam. The much lower-than-expected demand for touch panels, combines with competition from Chinese rivals, however, caused Wintek great losses on assets. Wintek filed a petition to the court last October for seeking business restructuring.

The announcement surprised many of its clients, including Xiaomi, which was also forced to find a new touch panel supplier. With a new supplier, it also took more time for quality control and to increase capacity, which also affected Xiaomi’s smartphone shipments for the fourth quarter last year.

Xiaomi’s smartphone sales took a plunge by four million units during the fourth quarter last year following Wintek’s restructuring announcement in October.

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Xiaomi said on Jan. 15 that the Mi Note, its brand smartphone with a 5.7-inch screen, will be available in Taiwan as soon as the second quarter.

In addition to Taiwan’s market, Mi Note is also facing direct competition from Apple’s iPhone 6 series as well as other phone-tablet hybrid handsets of similar size in both China and Taiwan. Despite the announcement of the plan to introduce Mi Note to Taiwan during the second quarter, Xiaomi, however, did not reveal more details of a specific date or even the price for the new handset.

Mi Note is regarded as a high-end device, that will come along with a 5.7-inch full-HD display, a Qualcomm Snapdragon 801 2.5GHz quad-core processor, 3GB of RAM, a 13-megapixel real camera, a 4-megapixel front-facing camera, a 3,000mAh battery and dual-SIM 4G LTE connectivity. The brand new smartphone will be sold at US$287 each for the 16G model and US$362 each for the 64G model when it is introduced to China’s market this March, Xiaomi said.

Mi Note Pro, a higher-end smartphone, is also introduced at the same time, while it will be sold at US$412 each for the 64G model. It will feature hardware improvements such as a 64-bit Snapdragon 810 processor, a quad-HD display, 4GB of RAM and LTE download speeds of up to 450 mega-bits per second.

Xiaomi has been recognized as “China’s Apple” since it was founded in 2010, while most of its smartphones’ features are very similar to its iPhone counterparts. The Beijing-based phone maker sells low-cost feature-rich phones, including the flagship Mi series and low-end Redmi models, and has teamed up with many Taiwanese suppliers such as Foxconn Technology Group (TPE: 2354) and Inventec Corp (TPE: 2356).

Canalys, a market research firm, said that during the second quarter of 2014, Xiaomi overtook Samsung Electronics Co (KRX: 005930) as China’s top smartphone maker for the first time, holding a 14% share. Samsung and Apple, the only international vendors in the top 10, together accounted for a 18 percent share of the world’s largest smartphone market, Canalys said without disclosing individual market share for Samsung and Apple (NASDAQ: AAPL). IDC ranked Xiaomi as the world’s third-largest smartphone maker in the third quarter of 2014. Meanwhile, Xiaomi expects to ship 100 million smartphones this year, a leap from 61.1 million last year.

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