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Xiaomi CEO Looks Past Selloff to 5G-Led China Smartphone Revival

Bloomberg logoBloomberg 11/1/2019 Bloomberg News

(Bloomberg) -- Xiaomi Corp.’s billionaire co-founder, shrugging off a share slump that’s wiped $6 billion off its market value in just three days, expects the advent of next-generation wireless to energize demand for its smartphones.

The Chinese devices maker is now focusing on pushing upmarket while expanding into Europe, forgoing the U.S., Chief Executive Officer Lei Jun told Bloomberg Television. He didn’t outline his reasons for avoiding the world’s largest economy, once deemed a promising arena for Xiaomi but now increasingly hostile to Chinese corporations.

On Thursday, Xiaomi announced plans to give its bargain “Redmi” label more prominence so it can begin to raise prices and specs on its flagship Mi gadgets. That effort to elevate its name comes as the smartphone boom plateaus and China’s economy decelerates. But rivals such as Huawei Technologies Co. have already claimed a share of the higher end of the market, encroaching on Apple Inc.’s turf.

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a man wearing a suit and tie: Xiaomi CEO Lei Jun Attends Redmi Smartphone Product Launch © Bloomberg Xiaomi CEO Lei Jun Attends Redmi Smartphone Product Launch

Lei Jun

While Lei declined to comment on how an economic deceleration might affect his business, he did say 5G will revive not just demand for smartphones, but also the internet services Xiaomi hosts. They now run the gamut from online music to movies and serve, collectively, some 220 million users.

“In China, the penetration rate of smartphones is extremely high,” Lei said in an interview. “But I think we are at the eve of 5G. I believe when 5G phones start to get popular, the overall demand from China will recover.”

Stock drops below HK$10 for the first time © Bloomberg Stock drops below HK$10 for the first time

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Xiaomi has shed 17 percent of its market value since a post-IPO lockup on billions of shares lifted Tuesday, as several analysts cut their price targets or estimates on the former high-flyer this week. Once touted as an internet company that can command a value of as much as $100 billion, Xiaomi is now worth roughly a third of that.

To be sure, it’s come a long way since its inception. Shareholders who’ve owned a piece of the company since its first funding rounds can pocket a fat profit. Some 3.9 billion shares bought in a round of funding that started in 2010 cost less than two Hong Kong cents each, according to the company’s prospectus.

“Over the past two to three years, we have entered about 80 countries and regions,” Lei told reporters at an earlier roundtable. “I hope the momentum continues.”

To contact Bloomberg News staff for this story: Gao Yuan in Beijing at ygao199@bloomberg.net;Tom Mackenzie in Beijing at tmackenzie5@bloomberg.net;Sabrina Mao in Beijing at jmao55@bloomberg.net

To contact the editors responsible for this story: Robert Fenner at rfenner@bloomberg.net, Edwin Chan

For more articles like this, please visit us at bloomberg.com

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