China-based Xiaomi launched its latest smartphones including the flagship Hongmi Note 5, in Seoul, South Korea, priced KRW200,000-300,000 (US$190-285), in cooperation with local telecom carriers SK Telecom and Korea Telecom. Their competitive pricing of less than US$300, far below Korea-based vendors' smartphone ASP of over US$500 in 2017, has quickly caught much attention in the Korea market.
Xiaomi's operating profits have always been below 5%, but the slim-profit strategy is also the China-based smartphone vendor's strongest weapon in its foray into new territories. Xiaomi has already outraced Samsung Electronics in India's smartphone market and is now looking to challenge the Korea giant on its home turf.
Currently, Samsung is the largest smartphone vendor in South Korea with a 55% share, followed by Apple at 28.3% and LG Electronics at 15.7%. The three handset vendors together already account for 99% of the market, leaving almost no room for any other players.
To nudge its way through the barriers, Xiaomi has introduced Hongmi Note 5, featuring a 5.99-inch screen, 12-megapixel back-end and 5-megapixel front-end cameras, and artificial intelligence (AI) support, priced at KRW299,000; it has been a star in Xiaomi's winning lineup for the race in India. Although Xiaomi has not revealed the number of its smartphone pre-orders from South Korea, sources from local channels have reported positive feedbacks from consumers.
Xiaomi is also said to be considering establishing its own retail store in South Korea.
China-based brand vendors have often embraced a strategy of growing market share first before turning their focus to profitability - a strategy that major Korea business groups used to rely on in the past. These large businesses now face a strong challenge in defending their home market without the weapon that they have already given up. It should not surprise anyone if China-based vendors gains the upper hand in the smartphone competition in South Korea.