Technology , Financials , Automotive Author：Yusuf Tuna Jul 10, 2019 01:46 PM (GMT+8)

After India and other emerging regions, Xiaomi now sets its sights on Japan; raising questions of the company's capacity at the saturated and conservative Japanese market.

A throng of passerby in Kabukicho, Tokyo. Image: Credit to Guillermo Perez on Unsplash

"Xiaomi is considering to launch the Japanese market by establishing online and offline stores," according to a manager of a major overseas market at Xiaomi, seeking a further increase in the company's overseas-oriented growth strategy.

Currently, Xiaomi Corp (小米) (1810: HK) does not have a presence or direct operation in Japan but is operating via intermediary and third-party institutions. The industry experts have severely questioned the smartphone maker's possible penetration to Japan. 

Japan was never an easy-to-conquer market for Chinese IT and high tech companies. Baidu has poured its resources, establishing an office at the heart of Tokyo, and has yet to come up with tangible results. Bytedance and Kuaishou, short-video giants, are amongst the other Chinese companies that have been struggling in the market.

Xiaomi's Japan initiative also demonstrating its ambitions to climb up the value chain and diversify its consumer segments. Xiaomi has yet to become mainstream in developed economies, but has been operating mainly in emerging markets. (Find more in this in-depth coverage) 

In 2018, around 51% of Xiaomi's total smartphone shipments accounted for overseas markets, and the company is gearing up in implementing its overseas-dominated strategy. Grappling with heightened, the Chinese market is hard to expand in it anymore, particularly in the smartphone industry.

India was the primary overseas market for the company in 2018. "Our customer services in India is also well recognized. We ranked number one in the India smartphone market for after-sales services satisfaction in the fourth quarter of 2018," quoted Xiaomi's annual report. But Japan would presumably not to be a smooth market to operate for Xiaomi.

"Japanese market is well-saturated and conservative. It is hard for Chinese companies to get their product accepted in Japan, we have tried, invested, and failed several rounds" said a driector-level representative of a amjor Chinese IT company who is familiar with the market. 

During the Q1 of 2018, Xiaomi has generated 62% of its revenues from smartphones, 28% from IoT and lifestyle products, and 10% from other internet services. Revenue of the IoT and lifestyle products segment rose by 56.5% to CNY 12 billion over the corresponding period of 2018, maintaining a rapid growth rate. (Q1/2019 results of Xiaomi) 

However, Xiaomi Corp stocks were down around %20 from the beginning of 2019, giving the company a market valuation of around HKG 229 billion. 

It is speculated by a Japanese media that Xiaomi will concentrate its operations on the IoT products in Japan, which is a reasonable claim considering Japan's potential in IoT. According to IDC Research, the IoT market in Japan is expected to be USD 175 billion in 2020 and has been growing steadily since 2013. 

Indeed, it may be hard for Xiaomi to show an assertive presence in Japan's smartphone market. Yet, there may be a great room to expand in the country's IoT field for Xiaomi.