Losing Steam In Smartphones, Chinese Firm Turns To Smart Rice Cookers : All Tech Considered One of China's most valuable tech startups, smartphone maker Xiaomi, is getting into networked appliances, in a bid to innovate its way out of trouble, as its core business falls flat.

Losing Steam In Smartphones, Chinese Firm Turns To Smart Rice Cookers

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Economic growth in China is slowing down. You can see that in the factories that are falling idle in that country. So many Chinese have pinned their hopes now on e-commerce, and we're going to look now at a company called Xiaomi. It's grown into one of the world's most valuable tech startups. Its loyal following across China has some drawing comparisons to Apple. Here's NPR's Anthony Kuhn in Beijing.

ANTHONY KUHN, BYLINE: Xiaomi got its start making cellphones, but lately, they've gotten into making appliances for so-called smart homes. This new division of the company is run by Su Jun.

Su Jun has brought me to the Mi Store, and the feeling here is actually a lot like Apple stores, but the product line-up here is kind of different. You've got 70-inch screen TVs. You've got bicycles. You've got Segway-like scooters.

Many of Xiaomi's sleekly designed gadgets use sensors to collect data. They're linked to the internet and can be controlled through a smartphone. Xiaomi is hardly the first to make such things. But Su Jun says Xiaomi's gadgets do things that Chinese customers really care about. For example, there's this high-tech rice cooker.

SU JUN: (Through interpreter) You scan a code on the packaging and it will automatically identify where in China the rice was grown. It will also detect the altitude you're at and adjust the pressure in the cooker accordingly, all of which will make your rice extra delicious.

KUHN: Su says that Xiaomi can cut the cost of making its products by up to half, thanks to high sales volumes and lightning-fast turnover.

JUN: (Through interpreter) Many of our products can be made in the factory, loaded onto trucks, shipped to warehouses and delivered to customers all in one day. How efficient is that?

KUHN: Like Apple, Xiaomi has a base of millions of young and worshipful fans. They follow the company's every move on social media and flock to product launches as if they were rock concerts.


KUHN: Su Jun says Xiaomi is building a so-called ecosystem of networked appliances to keep customers buying more products. This could help revive Xiaomi at a time when its core business, cellphones, is running into trouble. Two years ago, Xiaomi sold the most smartphones in China, beating Apple and Samsung. This year, they've slid to fifth place. Part of the reason, Su Jun explains, is that they've exhausted the online market.

JUN: (Through interpreter) Our online sales were growing so fast, we thought they would soon account for half of all sales. But we discovered that at a certain stage we began to run into bottlenecks.

KUHN: That's why Xiaomi has begun opening brick-and-mortar stores, but that raises the cost of selling its products. Jin Di is a research manager with the Boston-based consulting firm IDC. She says that Xiaomi is having difficulty keeping fans who want to upgrade their phones.

JIN DI: (Through interpreter) The low price strategy may have gained it lots of fans early on, but it's not a long-term development strategy.

KUHN: In other words, as China gets wealthier, its consumers want to upgrade their phones. But Xiaomi has slimmer pickings in the premium end of the market. At any rate, Jin says Xiaomi's experience offers answers to questions foreign investors are curious about.

DI: (Through interpreter) What are startups in China doing? What business models do they choose? What kind of customers are they trying to attract? And what services can they provide?

KUHN: Despite the setbacks, Jin Di thinks Xiaomi's prospects still look bright. She predicts that the market in China for networked appliances will double by decade's end. Anthony Kuhn, NPR News, Beijing.

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