TAIPEI, Taiwan (TheStreet) -- Xiaomi Technology, the Chinese developer of handsets described as iPhone clones, is set to test its formula of high-end specs and low prices in the lucrative U.S. market after winning over the homeland. It's a gamble.
Xiaomi, despite ranking No. 5 world market share and No. 1 in China, doesn't know what hand the American consumer will deal it. Americans like Apple's (AAPL) real iPhones, helping to fuel combined sales of 10 million 6 and 6-Plus phones during a single weekend in September. They also like Google (GOOG) Android handsets made by the world's No. 1 smartphone seller, Samsung (SSNLF) .
Americans may not be too excited about phones that are designed and made in China, and how many consumers in an English-speaking market can pronounce a never-seen-before word that starts with the letter X? (Xiaomi, pronounced SHIAO-mee, means "small rice" in Mandarin.)
Xiaomi's stuff holds up, based upon this reporter's experience with a Xiaomi 2S last year after Xiaomi began selling its Android smartphones through a local carrier in Taipei. It was fast, user-friendly and neither too big or nor too small.
China Daily calls Xiaomi's founder and CEO Lei Jun "China's Steve Jobs."
American consumers might miss that comparison because of Xiaomi's hard-to-pronounce name, dearth of U.S. patents and lack of relationships with distributors, says Neil Mawston, global wireless practice executive director at Strategy Analytics in the U.K. He forecasts Xiaomi will take no more than a 5% U.S. market share over the next three years.
"We expect Xiaomi to face a tough slog to succeed in the U.S. smartphone market," Mawston says. "Xiaomi faces major obstacles."
Spotty distribution would tip the market toward existing favorites who work with the likes of AT&T (T) and Best Buy (BBY) . Lack of patents could open it to trademark lawsuits from litigation-happy Apple and Samsung.
As of earlier this year, the developer also lacked software to allow convenient switching of interface languages from the default Chinese, an obvious technical barrier to sales abroad.
Xiaomi declined to comment on its expectations for the U.S. market. Apple declined to comment when asked about a potential rival. Samsung declined to comment, too.
Since its foray into Taiwan, the 4-year-old Chinese developer has pushed to keep expanding offshore. This year Xiaomi entered 10 new markets, including India, Brazil and Russia, China Daily says. The company may need help from offshore to meet a 2015 shipment target of 100 million units as growth in smartphone sales across brands declines in China.
Whether the U.S. is the right place will take Xiaomi about two years to learn, says Wilson Miao, an independent high-tech analyst in Taipei. Deals with major distributors would help, as would competitive patents, he says. But he cautions that American consumers also distrust made-in-China products, particularly smartphones that were also designed in China.
"Especially in terms of smartphones, a lot of Americans think China is not an honest country," Miao says.
At the time of publication, the author held no positions in any of the stocks mentioned.
This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.
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