Chinese smartphone and IoT developer Xioami Corporation (小米) (1810: HK) has made a large-scale investment in Intelligence Silicon (智多晶), making Xiaomi the fourth-largest shareholder of the chipmaker.
Intelligence Silicon has been developing a series of chips that are used in face recognition & tracking, video surveillance and image processing for 4G/5G supporting devices. The chipmaker has been working with some global companies, including, among others, Japanese IT company Fujitsu and Chinese video surveillance behemoth Hikvision.
Xian-based Intelligence Silicon’s main product is a 40nm Field Programmable Gate Array (FPGA) semiconductor device, that is an integrated circuit designed to be configured by a customer or a designer after manufacturing, making it easier for the buyer to tailor the chip based on the particular functions needed. Considering Xiaomi’s massive IoT product range, Xiaomi might utilize FPGAs for several products.
The strategic move does not mark Chinese smartphone giant’s first initiative in making its chips and decreasing its dependency on thirds parties: Xiaomi has invested in VeriSilicon Holdings, taking 6.25% stake in Chinese chip designer in July 2019. In fact, the Beijing-based smartphone maker tried to initiate its own chips in February 2017 for the first time, to cut its reliance on third-party suppliers. An apparent ramp up can also be observed in the company’s chipmaking story in the second half of 2019.
Xiaomi accelerated its 5G+IoT strategy in 2019, even as it changed its organizational structure significantly to upgrade its business model.
The composition of Xiaomi’s revenues has been reshaped by the strengthening of the IoT business. IoT and lifestyle products accounted for more than 28% of Xiaomi’s revenue in the second quarter of 2019, and their contribution has long been increasing.
Perhaps, we will not refer to Xiaomi as 'the smartphone maker', but as 'the Chinese IoT giant' in the near future. Mainly, the IoT business has been growing aggressively in the mainland. The company is still focusing on the smartphones in developing its overseas markets. . (Check out this analysis on Xiaomi’s global expansion strategy)
IoT products will presumably make an essential portion of Xiaomi’s revenues going forward. The company has to create a strategy based on its self-produced chips if it is to create a massive IoT supply chain. Some of the products on Xiaomi’s IoT platform are also expanding to support even non-Xiaomi products..
As its part of this latest move in IoT, Xiaomi has announced a 30W wireless charging product, as China prepares to update its telecommunication infrastructure to 5G. Notably, the high power-consumption problem still stands as one of the biggest obstacles in deploying the first generation of 5G -supported phones.
With its over 130 million connected devices making up the world’s largest IoT platform, Xiaomi is destined to develop its cheap and simple chips to support millions of new devices. The Intelligence Silicon move can be read from this perspective.