Last month, Xiaomi inked a deal with Microsoft to purchase 1500 patents. Do you know what the reasons behind that are? Plus, do you know what repercussion this deal or upcoming such deals are going to have on 170 million Xiaomi’s fan all over the world?
Well, read on to find answers to both the questions.
Why Xiaomi Purchased 1500 Patents from Microsoft?
Xiaomi, for quite some time, is trying to expand itself globally to cement itself as a truly global company. One thing which is keeping it from doing this is Xiaomi’s patent portfolio which looks something like this.
You can see that majority of patents in Xiaomi’s patent portfolio are in China. It has only 222, 144 and 142 patents in the US, South Korea, and Europe. This so thin patent portfolio is the reason Xiaomi can’t set its foot in the smartphone market of these countries.
In the past, for example, Xiaomi tried entering into the US and Korean market. In both the markets, it was welcomed with a patent infringement lawsuit. In the US, Blue Spike sued Xiaomi because its model Mi5 and Mi5 Plus infringed one of their patents, for example.
The recent deal with Microsoft thus will lead to a healthy patent portfolio in the US for Xiaomi. The additional 1500 patents will take the number to 1722. This, for sure, will help Xiaomi from the nightmare of patent lawsuits in the US.
What will be the repercussions on Xiaomi’s Fans?
Since its inception, Xiaomi has been following a lean approach for selling its devices and also has not been spending money on traditional advertisement, brick and mortar stores, etc. This strategy has helped Xiaomi to keep its costs low.
Hence, it was able to sell its devices at low prices as compared to devices of other vendors with same specifications.
The saturated domestic market and new competitors following the same strategies, however, have changed the time for Xiaomi. Its revenue growth has slowed and all their efforts to expand itself globally has met with disappointments.
At this moment, heading to foreign markets seems like the only way for Xiaomi to fight the slug. And only patent purchase campaign like this can help Xiaomi in its pursuit. Further, as the company has become mature, it has started spending money on new stores in India, China, and Philippines.
The cost of opening 200 stores pan Philippines runs in millions. Other than that, though the amount is still undisclosed, the purchase of 1500 patents will also cost Xiaomi to pay Microsoft in millions. To give you an example, Yahoo is selling its 3000 patents in $3 billion. Hence, Microsoft’s patents are not going to be cheap whatsoever.
These things in conjunction will increase the cost of production per unit, which eventually will increase the price of Xiaomi’s devices.
The last thing I am waiting for, is to see Xiaomi’s advertisement running on my TV.
About Author: Vipin Singh is technology enthusiast who loves to write on upcoming technologies and company strategies. In his free time he adds extra sugar in his tea.
You need a fact check. Patents sure are expensive. If you buy them. If you share them that’s a different story. Cue Xiaomi and its new partnership with Microsoft. Why would Microsoft partner with an unrelated Chinese company who sells smartphones on their rival’s Android platform? Simple. Microsoft hit a brick wall with their terrible Window Phone OS. The way to save their platform or maybe just save face when Window Phone ultimately crumbles is to partner with a market leader in the smartphone industry. For now they are getting Xiaomi to sell a few phones preinstalled with Window Phone OS instead of Xiaomi’s much adored MIUI. Even more recent is the deal that even on MIUI Xiaomi’s phones will come prepackaged with bloatware in the form of Microsoft Office + Skype. So Microsoft gets more users onto its apps and OS and in return for this Xiaomi will be getting access not ownership of Microsoft’s very hefty patent portfolio.
Not a bad strategy for a 6 yr old baby company.
Xiaomi coming up with Windows Phones? Can you point me to where that is mentioned? Yes, it might be a possibility, but I dont think Xiaomi will jumpt he gun so soon.. Hugo Barra wanted to create an ecosystem with MIUI, so not sure if they will move to Windows anytime soon
Muhab, Microsoft earns in billions by licensing its patents on Android OS. Did you know that? Android OS? So, it has researched a lot on Android so that it can reap the benefit while it has its own OS — Windows.
This deal is a pure win-win. You know most of the people use Google Hangout, YOuTube, etc by default because the less tech savvy people don’t know what they hell rooting is and hence they use these Apps for a long time.
Now same will happen with Skype and MS-Office. Microsoft sold patents and its services as well. Xiaomi was in dire need of those patents. Microsoft hit the iron when it was hot.