Xiaomi mediocre chip shows need for stronger R&D

By Li Qiaoyi Source:Global Times Published: 2017/3/8 0:28:39

Illustration: Peter C. Espina/GT

Beijing-based smartphone maker Xiaomi has a proven track record of achieving quick success, making itself a name in the globe phone arena within a few short years as well as sprawling into a broad range of businesses beyond smartphones in a fairly short timeframe. Its legend continues as the company has taken just slightly over two years to launch its first-ever in-house chipset, released at the end of February, and thus joins an elite club of phone manufacturers that make their own chipsets.

Nevertheless, the upstart phone vendor's expansion into chipmaking - a riskier and more costly venture - is by its very nature an indication that the nearly seven-year-old start-up has hit an inflection point and is conceivably ready for a transition away from its excessive focus on efficiency. It's also a wake-up call for homegrown tech brands that adeptness at creating marketing hype shouldn't overshadow the importance of building strong R&D capabilities.

As Xiaomi takes the wraps off the eight-core Surge S1 that catapults it into a chipmaker, it is evident that the company has been mulling over ways to get its groove back in the smartphone arena where it quickly rose to global prominence but has found itself under greater pressure to stand out in the cutthroat marketplace.

Back in the third quarter of 2014, Xiaomi broke into the global ranking of the top five smartphone makers, according to data from IDC. It's fair to say that the company, which only started making phones in 2011, was incomparable in its ability to attract the public's attention at that time. One year later, however, its domestic rival Huawei grabbed the limelight, as Xiaomi missed an already lowered sales target of 80-100 million phones for 2015.

The latest quarterly figures from IDC show that in the fourth quarter of last year, Huawei was the third-largest smartphone vendor worldwide as measured by shipments, followed by two other Chinese phone brands, Oppo and Vivo. Xiaomi has remained invisible in the ranking which still saw Apple and Samsung out-ship other phone manufacturers across the globe.

Apparently, Xiaomi understood that its quick road map to smartphone fame needed to be revised to not just focus on efficiency and cost savings, but also to foster its inner capabilities and powers. In late 2014, Xiaomi's subsidiary Pinecone Electronics began developing its proprietary chip, an effort which resulted in the Surge S1 chipset.

Worth noting is that the chipset is being integrated with Xiaomi's new mid-range Mi 5C phone, which doesn't create much promise of success, as the Surge S1, reportedly costing Xiaomi $145 million to develop, is built on a 28-nanometer manufacturing process, which is positioned well behind high-end chips such as Qualcomm's Snapdragon 835 using a 10-namometer process mode and Huawei's Kirin 960 based on a 16-nanometer architecture. Only if Xiaomi's rumored higher-end chip, purported to be built also using the 10-namometer process, eventually hits the market, will the phone maker be able to truly convince the market of its chipmaking capacity. With domestic phone makers competing fiercely in the premium smartphone battlefield that requires phones to be outfitted with higher-end chips, it would make little sense for Xiaomi to only places its bet on mediocre chips.

Also, it is unlikely that the launch of its in-house chipset will move the company entirely away from its reliance on Qualcomm and MediaTek, as even some of Samsung's phones, notably the upcoming Galaxy S8 still rely on Qualcomm, despite the South Korean technology conglomerate's own chipmaking capabilities.

Having said that, it's more likely that the chipset breakthrough equips Xiaomi with a hedge against a range of smartphones powered by chips mostly from either Qualcomm or MediaTek. Still, while there's no guarantee that the company's two-year-plus effort in bringing its own chipset into reality will necessarily outshine Huawei's multi-year effort that has genuinely pit its in-house chips against Qualcomm chips and has made Huawei phones one of the top-favored choices worldwide, there's one thing for sure: Xiaomi can't afford to lag behind in terms of R&D capabilities.

Many other Chinese tech brands should draw lessons from Xiaomi's chipmaking adventure. Over the past few years, a number of start-ups have found fame in China during the country's mobile Internet boom, but it seems often the case that the pinnacle achievements of many of these businesses are impressive user growth, astounding fundraising figures or frequent mergers and acquisitions. Few have gone on to be known as an R&D powerhouse. That should no longer be the trend, however fascinating their new products seem to be on the surface.

The author is a reporter with the Global Times. bizopinion@globaltimes.com.cn

Posted in: INSIDER'S EYE

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