Why $46 Billion Worth Xiaomi Is Crowd Funding Their Next Smartphone?


As the calendar year rolls to an end, we find ourselves face to face with November, the month that heralds the beginning of the holiday season! And what better way to begin a season of discounts than with a surprisingly capable LTE phone at a jaw-dropping price of just $63, or 399 Yuan. Don’t get your hopes too up, though, for if the pricing structure hasn’t tipped you off already, this is one of those China only phones that will probably never see the light of day in other markets. However, the reason we are so excited about this phone has nothing to do with the phone at all! This phone, tentatively dubbed the Redmi 2C, is the brainchild of Xiaomi; and marks their foray into the crowdsourcing market.

The crowdsourcing model has been utilised by many companies in the past with varying level of success; however it is the first time that we see a major OEM of the smartphone industry take to this trend. So why is Xiaomi taking this route? Is this just a knee-jerk reaction to losing the top spot in smartphone sales to Huawei in China? Or is there some other reason that has made the company stepping away from the flash sales model that has brought Xiaomi tremendous success in the past? With these questions buzzing in our heads, we dig deeper into the story.

Xiaomi Celebrates Singles Day with New SmartPhone

November 11th is a very special day for the China, in fact, one can very well equate it with the Black Friday of US. In fact, in a tradition similar to that of Black Friday, on November 11th or Singles Day as it’s otherwise known, we find various Chinese manufacturers giving massive discounts on gadgets. Xiaomi, however, decided to take it one notch further this time with them releasing new products like the Mi Band 1S as well as offer a number of deals over a period of 11 days to celebrate Singles Day. And to put the cherry on top of the cake, they are announcing a new phone on the 11th of this month.

Now while it may not be incredibly unique from a spec standpoint with very modest features very similar to that of the Redmi 2, but the price is certainly spectacular. Rumored to be the world’s cheapest smartphone at $63 (399 Yuan) this crowd-funded device is going to be available only in limited quantities. However, there are conflicting reports which suggest that the pledge amount will be $157 (1000 Yuan) and the higher price may indicate towards the recently leaked Redmi Note 2 Pro being announced. Whatever be the specs, we will come to know the long and short of it on November 11th, but if Xiaomi’s previous flash sales are any indications, you’d have to be fast to nab one as there are only 100,000 of these devices that are going to be made.

The Move to CrowdFunding

Smartphone manufacturers make phones all the time so one may wonder why this particular unreleased smartphone is worth such a lot of discussion. That is because, till now, the companies that have traditionally moved towards crowdfunding have been startups that have just started out. Xiaomi already has a very wide user base and have been evaluated at nearly $46 billion. So what would make an OEM that is literally sitting on a stockpile of cash move towards crowdfunding?

Lack of Funds

While Xiaomi as a company may have been evaluated at a whopping $46 billion, it is important to keep in mind that they have their fingers in many pies. Couple that with the fact that their smartphone division hasn’t been able to perform that well lately, and we may have found the reason for this move. The Chinese giant can’t be blamed for playing it safe this time round and asking it’s fans to step up for them!

Also, Xiaomi has recently been in trouble with Chinese authorities and has had to pay hefty fines for discrepancies in advertisements. They might be looking to recuperate their losses and build back their lost fan support with this new effort!


Speaking of fans, Xiaomi has always depended on their fanbase and word of mouth for their publicity and advertisement. This technique of using social media and forums to spread the word has enabled Xiaomi to keep their advertising budgets wafer thin which is critical for a company working with a laser thin margins as Xiaomi has been.

A crowdfunded smartphone, that too if it turns out to be the cheapest LTE phone in the world, is going to cause a huge uproar in Chinese social media. In the frenzy of grabbing these cheap phones, thousands will flock to Xiaomi’s site which will lead to an increase in other models for them as well as this latest iteration is said to be available in limited quantities!

Gauging Public Opinion

One sure fire way of knowing if people will buy a product is to see if they would pay for the product even before it exists. That is basically the principle on which crowdfunding operates. Xiaomi wants to see if their fanbase has enough loyal supporters who would pay upfront for a device. While, this may not be a very expensive device, the fact that a number of people are willing to pay upfront, will provide Xiaomi a very good understanding of how much public confidence they have earned so far and will be instrumental in the future when they decide on launching something experimental. So, in a way this crowdfunding could turn out to be Xiaomi’s little social experiment.

Solving Issues With the Flash Sale

While the flash sales model has worked great for Xiaomi, there have been numerous complaints about the fact that loyal customers or fans don’t get the device. The crowdfunding model provides an opportunity for these loyal fans to get their hands on a device ahead of everybody else and put their money where their mouth is!

Xiaomi may have wisened up to the fact that flash sales end up doing more harm than good to the brand in the long run. Crowdfunding their new smartphone may be just a pilot programme to a greater shift in sales strategy. With a pre-order system in place, Xiaomi can presumably handle the supply-demand gap better by having a rough estimate of the demand for any future device.

Final Thoughts

Xiaomi, a company that has ranked ahead of Apple, Facebook and even Microsoft as the 2nd smartest company in 2015, is once again making a bold new move. While there are many startup companies like the Nextbit Robin, who are using crowdfunding to sell their smartphones, none of these companies have yet been able to deliver on their promises. And while most of these phones have something to separate them from the crowd, be it outlandish or useful, what remains to be seen is what unique aspect of the device Xiaomi can unveil that will draw in pledges.

Chinese consumers spent over $9 billion during Singles Day, and TMall, one of China’s biggest online stores, sold around 1.16 million Xiaomi smartphones on that day last year. While that is quite a staggering amount to think about, one wonders if Xiaomi can one up that this year with their crowdfunding scheme. So will Xiaomi skim the waters like Pebble or drown in the depths of the ocean of crowdfunded projects? Only time will tell!

We have reached out to Hugo Barra, Vice President – Xiaomi, to understand the company’s view on the rumored initiative. He replied back asking some more clarity on the topic chosen by us. We are yet to receive his views, shall update the article as soon as we hear from him. Watch this space !

To Top