China's Steve Jobs?
here aren’t many American entrepreneurs who would have the nerve to compare themselves to Steve Jobs and Apple. To find a guy crazy enough to do that, you have to go to China.
Ladies and gentlemen, meet Lei Jun, the jeans-and-black-shirt-wearing billionaire founder of Xiaomi, China’s hottest smartphone company. And, if you believe Lei, the next Steve Jobs.
Beijing-based Xiaomi sells an An- droid smartphone called the MI-One. It’s a high-powered phone based on a dual-core processor from Qualcomm but with a price far lower than many comparably equipped phones sold in China. That combination of raw power and a reasonable price tag has attracted huge attention from Chinese consumers: When the phone went on sale last fall, Xiaomi received 300,000 preorders in the first 34 hours.
Less than a year after launch the company has sold more than 3 million MI-Ones and counting. The phone is hot. Red hot. Apple hot.
Lei, a 43-year-old investor and serial entrepreneur, is the public face of Xiaomi. Like Jobs, he has intensely loyal fans—mostly young, male gadget hounds. The company launched an annual convention for fans and holds regular user meet-ups that have the feel of religious revivals, where diehard fans sing, cheer and play games. Lei has more than 4 million microblog followers in China and spends hours on MiTalk, the Xiaomi chat site, to solicit feedback from users.
In his first big score, Lei sold the online retailer Joyo.com to Amazon in 2004 for $75 million. Three years later he listed Kingsoft, an antivirus software firm, on the Hong Kong Stock Exchange. He’s an investor in both UC Web, which sells a popular mobile browser, and YY.com, which offers a real-time video app.
Lei founded Xiaomi in 2010 with his friend Lin Bin, a former Microsoft and Google engineer who is now Xiaomi’s president. The two men, both 43, both married with daughters (Lin has three, Lei two), had spent the previous months dreaming of a high-spec, low-price phone.
Their big idea is to subsidise the cost of the handset by getting buyers to pay more for various services—not unlike the way that Apple iPhone users pay for software from the App Store.
It’s just one more way the com- pany keeps inviting comparisons with Apple. Lei has a love-hate relationship when it comes to the comparison. He says Jobs is an inspiration but specifically denies, for instance, copying his dress code, asserting that his casual attire for product launches is simply a plug for his Vancl fashion e-commerce site.
“I was annoyed in the beginning, very annoyed. But I don’t mind any- more,” he says of the comparisons.
Rather remarkably, Lei risks the wrath of Apple fans everywhere by asserting that he can succeed in China in ways Jobs couldn’t have matched.
“If Jobs had lived in China, I think he could not have succeeded,” Lei said in an interview with Forbes. “Jobs was a scrupulous perfectionist, while Chinese culture emphasises the middle path.” In China, he says, “you also need to make compro- mises.” That’s a lesson that American companies have had trouble learning: Witness Google’s departure from mainland China in the face of persist- ent censorship of search results.
One thing is for sure: In China the guy produces Jobs-like buzz. The rapid early sales of the phone came largely through word of mouth, with no spending on print or TV ads. And the buzz continues: After selling 3 million phones to date, Xiaomi is on track to hit 5 million to 6 million units by year-end.
Part of the mythology around Lei involves a highly public spat he’s having with Zhou Hongyi, the CEO of Nasdaq-listed Qihoo 360 Technology, a $1.9 billion market cap security software firm. For one thing, Zhou claims that Xiaomi makes a profit of nearly $100 per phone, disputing Lei’s assertion that it sells the phone cheaply and will make up the difference with services. Zhou thinks Xiaomi’s customers are suckers if they believe Lei.
Another source of friction: Zhou leaked the news that Xiaomi’s latest round gave the company a $4 billion valuation. While the number was accurate, Lei says, the leak made it harder to close the deal with privacy-sensitive investors.
Tied into the feud is the fact that Qihoo competes with Lei’s Kingsoft in the antivirus PC software market. Qihoo has been giving away a free version of its antivirus software for users who download the company’s browser, a move that creates issues for Kingsoft.
Iphone: Simon Edwards / Future Publishing Via Getty Images
Even Lei’s detractors would concede that the opportunity here is enormous.
China Mobile is the largest mobile carrier in the world, with 677 million users as of the end of May; compare that with AT&T with a little over 100 million as of the end of March. The number two and three carriers in China—China Telecom and China Unicom—also are bigger than any US carrier.