Apple Inc. (AAPL): Should It Buy Chinese Smartphone Maker Xiaomi?

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Apple Inc. (NASDAQ:AAPL)’s “less expensive iPhone” was priced higher than analysts hoped and isn’t selling as well as many hoped it would. So how could the company make an even cheaper iPhone? We’ve heard a few ideas, but here’s a new one. Forbes contributor Panos Mourdoukoutas says Apple should buy Xiaomi, a Chinese company which makes very inexpensive smartphones.

Apple and Xiaomi

The author emphasizes that he doesn’t even know if Apple Inc. (NASDAQ:AAPL) has any interest in buying Xiaomi, let alone if the company is even for sale. He says the Chinese company has learned a lot from Google Inc (NASDAQ:GOOG) and Apple. Currently it makes smartphones running Google’s free open source Android operating system. He says the Chinese company learned from Apple “how to master the brand buzz” and “how to compete on innovation rather than imitation.”

Why Apple might want to buy Xiaomi

He provided two big reasons he suggests Apple Inc. (NASDAQ:AAPL) could gain a lot from buying the company. He notes that the acquisition would take out a key competitor in the Chinese market. Cheap Chinese smartphones have been Apple’s biggest problem in terms of competition in China. Flurry Analytics estimates that Xiaomi holds about 5% of the market in China. While that’s a pretty small percent, it still adds up to quite a bit of users in China, which is the world’s largest smartphone market.

Apple Inc. (NASDAQ:AAPL) could also begin making a truly low-cost smartphone as well without affecting its image and reputation as a premium brand. Apple has closely guarded its reputation, and some have speculated that one reason the less expensive iPhone 5C still carries a higher price tag than many other smartphones is because Apple wants to keep its reputation intact. However, Xiaomi’s phones come with price tags which are less than half that of the iPhone, making Mourdoukoutas’ suggestion an interesting one

Will Apple buy Xiaomi?

He admits that for Apple to buy the Chinese company would be very unlikely. However, he notes that Apple has focused more on organic growth in the past, although 2013 was certainly a year for acquisitions at Apple. Also acquiring a company in China is difficult and can cause all sorts of problems.

While he doesn’t bet a deal like this would happen, he thinks Apple Inc. (NASDAQ:AAPL) will get into some kind of deal with a maker of low-cost smartphones, purely because it makes good business sense as the market shifts toward the lower end of the spectrum.

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