Xiaomi, a Chinese electronics manufacturer, has bought a large number of patents from Microsoft in a deal that experts believe is a precursor to the firm looking to break into the Western smartphone markets.
Xiaomi looking to Western markets
Xiaomi have purchased almost 1,500 patents including cloud, communications and video technologies. This new agreement means that from September, Xiaomi will extend its connections with Microsoft (currently the tablet, Mi Pad features Windows 10 and Microsoft Azure helps fire the Mi Cloud services) with applications including Microsoft Office, Outlook and Skype. These will now all come pre-installed on various devices offered by Xiaomi, although there may be some variation between different models.
One of the major challenges faced when trying to enter new markets is lawsuits, usually relating to patent infringement, (and usually coming from established players in the market looking to keep the competition out), and this allows them to sidestep those potential problems. Indeed, when Xiaomi tried to enter the Indian market, it faced legal challenges from Swedish electronics manufacturer, Ericsson about patent encroachment.
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Losing Market Share
Xiaomi’s move comes amid a backdrop of falling sales. They missed their smartphone unit sales target (100million) for 2015 by almost 30 percent, and have seen domestic rivals such as Oppo and Vivo move past them in phone sales. This means that Xiaomi rank only seventh in global market share, which is down from third in 2014.
With their main markets bring China and Brazil, now is the time for their attack into Western markets as they attempt to move back up the rankings.
Microsoft Change in Strategy
Microsoft’s own smartphone production capabilities, in conjunction with Nokia, have recently been heavily scaled back and only earlier this week, it was announced that 1850 jobs would disappear in part of a restructuring which essentially ends their attempts at challenging Apple and Samsung. With a clear exit from the smartphone production business, it appears Microsoft is instead looking to monetize its apps through subscriptions and fees.
Interestingly, Microsoft products are very popular in China, but generate very little revenue due to the rife and widespread piracy practices there.