What is Xiaomi's advantage in AIoT competition with Vivo, Oppo and Huawei

Focus

• Why does Xiaomi value AIoT so much?

• What is Xiaomi's AIoT difference from other IOT layout?

• What is the key of winning the AIoT campaign?

In 2013, the spring tide of mobile Internet was just beginning, the old and new patterns of mobile phones overlapped, and O2O was the absolute outlet. Whether it's hardware manufacturers or Internet companies, in the ultra-high growth dividend of mobile Internet, everyone was blind, and they rushed to do everything possible to share the traffic. However, the prosperity often hides the problems. This dividend wave is good, but where is the next trend?

At the end of 2013, Lei Jun saw the trend of intelligent hardware and IOT (Internet of Things). In the preface of Xiaomi ecological chain battlefield notes, Lei Jun recalled: "at that time, we only see the trend, but it will take at least 5 or 8 years for IOT to become a real reality. So, we decided to use Xiaomi as a mobile phone experience to copy 100 mobile phones like Xiaomi and lay out IOT in advance."

In six years, Xiaomi, who was the first to put forward AIoT (AI Artificial Intelligence + IOT), became the definer of AIoT Intelligent life. According to the latest quarterly financial report (Q3), part of Xiaomi IOT's income from consumer products was 15.6 billion yuan, up 44.4% year on year. In the first three quarters of 2019, IOT has contributed 42.59 billion yuan to Xiaomi, accounting for 28.5% of the total revenue. Compared with 20% in 2017 and 25% in 2018, IOT also has a steady growth.

On the first working day of 2020, Lei Jun will further develop Xiaomi's AIoT goal. In his new year's letter, he said "Xiaomi will invest at least 50 billion yuan in the 5G + AIoT field in the next five years". 

Xiaomi's achievements are obvious to all, but IOT is a complex and special comprehensive field. Not only Xiaomi, but also many enterprises in the fields of Internet giant BAT, TCL with hardware appliance background, Hisense and artificial intelligence are betting on IOT.

It is not only a huge entrance with "Things" as the unit, but also a key to the future with the combination of artificial intelligence and data access. In the words of the Chinese Academy of engineering, the Internet of Things realizes the interaction and seamless link of information between people and things, things and things. And it achieves the purpose of real-time control, precise management and scientific decision-making of the physical world.

Obviously, the battle of "the future" has already begun. So, where is the way to land in the future? What's different about Xiaomi's AIoT? Where is the key to AIoT?

The long-term layout of Xiaomi's AIoT

Compared with other mobile phone manufacturers, Xiaomi's first mover advantage is still remarkable.

As the first one among mobile phone manufacturers to start the layout of IOT, the number of devices connected to Xiaomi IOT platform (excluding mobile phones and laptops) has reached 210 million, and the number of monthly active users of MIUI worldwide has reached 292 million.

There are many signs that Xiaomi is speeding up the pace of AIoT: organizationally, the intelligent hardware department, IOT platform department and technical committee were established. The artificial intelligence and cloud platform department were separated. And the large household appliances business department was added. For those reasons, AIoT is gradually pushed to the front of the stage.

These three departments including AI department, big data department, cloud platform department will be answerable directly to CEO Lei Jun. It means that the AI business is independent and upgraded to the first level department. Lei Jun attaches more importance to the importance of technology. So Xiaomi set up the AIoT strategy committee, and appointed Fan Dian, general manager of Xiaomi's IOT platform department, as the chairman of the committee.

Strategically, in 2019, Lei Jun proposed the idea of " All in AIoT", and he planned to invest 10 billion yuan in AIoT in five years to upgrade. "From 2019, for Xiaomi, AIoT is 'All in IOT'!" Xiaomi's "mobile + AIoT dual engine strategy has been finalized. The development of AIoT has been put on the same important position as mobile phones.

At the end of 2019, Fan Dian, chairman of Xiaomi group's AIoT strategy committee and general manager of Xiaomi's IOT platform department, announced Xiaomi's strategy of "1 + 4 + X" in the IOT category. The "1" refers to mobile phone, "4" refers to TVs, smart speakers, routers and laptops. And "X" is provided by ecological chain enterprises and cooperative enterprises.

Of course, as mentioned above, Xiaomi will continue to fully invest in "AIoT" in 2020. In the next five years, at least 50 billion yuan will be invested in "5G + AIoT". It undoubtedly announces Xiaomi's firm confidence in AIoT to the whole company and the outside world.

In terms of products, the growth rate of AIoT is considerable.

In addition to mobile phones, by the end of 2019, Xiaomi TV has achieved the annual shipments goal of 10 million in China. In the first half of 2019, the shipments of Xiaomi's air conditioners exceeded 1 million. On the one hand, it proves the strong cross-border ability of Xiaomi's high-efficiency business model; on the other hand, it proves that Xiaomi's IOT platform and Xiaomi's own drainage ability are strong. At the same time, it proves that the subversive effect of Internet smart home on traditional household appliances is obvious.

Xiaomi also continues to enrich its IOT product portfolio, such as Mijia Internet stove set, Xiaomi Bracelet 4, Xiaoai teacher, Xiaomi smart door lock, and the washing and drying machine. As of September 30, 2019, the number of IOT devices connected to the IOT platform (excluding smartphones and laptops) reached 210 million, up 62.0% year on year. The number of users (excluding smartphones and laptops) with 5 or more devices connected to Xiaomi IOT platform increased to 3.5 million, up 78.7% year on year.

At To B, AIoT opened a new world for Xiaomi. At the 2019 developer conference, Xiaomi launched the Intelligent hotel solution, which can be configured from speaker, TV, gateway, lighting, temperature control and other aspects. It has customized software platform and national service deployment and after-sales. Similar to Xiaomi intelligent real estate solutions, in addition to most of the intelligent equipment room, community equipment, such as access control, parking, elevators, walkie talkies, etc., are also available. And 2000 sets are expected to be delivered within the year. The IOT enterprise suite has also been officially launched. The B-end account centralized control purifier, sensor and other products, as well as data statistics and more customized services.

It is also related to why Xiaomi must take the company's efforts to develop AIoT.

In terms of trend, according to international data company estimates, the number of devices connected to the Internet will increase from 11 billion in 2016 to 80 billion in 2025. At that time, 180 Bytes of data will be generated every year, far higher than 4.4 Bytes in 2013 and 44 Bytes in 2020.

Lei Jun thinks that AIoT is the Internet of Intelligent Things, which is the next generation of super Internet. In the future, all devices in the home can be interconnected, and can interact with voice and artificial intelligence. This is the most important technology development trend in the world in the next 10 years.

The combination of 5G + AI + IOT will not only bring about a surge in the number of connections, but also a more structured change. Lei Jun believes that: "it should be seen as the liberation of people, the alleviation of social life anxiety, the maintenance of environmental sustainable development, and the promotion of life happiness."

Under such a huge wave trend, Xiaomi is likely to be the first stop for users to contact the world of AIoT. The charm of AIoT lies in butterfly effect. The user stickiness transformed from a single entrance mental occupation is immeasurable.

Analysts at China Merchants Securities said that for enterprise IOT, "the future competition is not in hardware, but in the value-added and management of data." Xiaomi IOT platform has nearly 200 million device connections, plus more than 200 million mobile MIUI users and Xiaomi network users, which forms a huge advantage in big data integration. These huge user accumulation can also form the platform scale effect, reducing the marginal cost for further drainage.

From the perspective of capital market, Xiaomi has been suffering from being considered as a hardware company with a price earnings ratio of less than 20. But with the gradual clarity of Xiaomi's AIoT strategy, the market also realized the unique value of Xiaomi.

Nomura Securities recently reported that Xiaomi's third quarter smartphone gross profit rate exceeded expectations and its Internet of Things (IOT) business was strong. It maintained Xiaomi's "buy" investment rating and target price of HK $11.

CITIC Securities believes that in the medium term, the global intelligent hardware industry has a high prosperity. Considering Xiaomi's dominant position in IOT industry design and supply chain management, CITIC judges Xiaomi's IOT business is expected to maintain a compound growth rate of more than 30%.

In addition, it is worth noting that the mobile phone is an important entrance to AIoT. And AIoT will also backfeed the mobile phone to support Xiaomi's development in the field of mobile phones.

The competition for the entrance of IOT is fierce. Despite Xiaomi's "1 + 4 + X" strategic deployment, there are Huawei's "1 + 8 + N" ecological layout, Vivo's "one main and three auxiliary", Oppo's smart watch and AR glasses product release. However, everyone's thinking and rhythm are very different.

Vivo officially announced its entry into IOT in September 2018. Based on Jovi intelligent voice system, it released Jovi IOT through the establishment of application layer protocol. Oppo started to lay out IOT in 2019. At the end of the year's developer conference, Oppo first announced Hey Things deployed for IOT. Huawei's IOT is mainly based on cloud service, communication service technology and industrial layout.

Xiaomi is different

The benefits of IOT have been seen and are starting to betting on it. Competition is coming, Xiaomi has to show its different advantages.

According to CICC analysts, Xiaomi AIoT has four unique features:

• Empowering eco chain companies to provide better products;

• Attract customers to the company's retail channels in an efficient way;

• Popular products can form a unique internet of things platform;

• Income diversification.

In fact, Xiaomi's advantages lie in its early layout, multi-dimensional and large-scale entrance, and systematic data precipitation and application. These advantages are interrelated and become the key of AIoT.

Let's take apart A-I-O-T. In these four letters, O is a preposition, the other three letters are three notional word, which also represent three key words of AIoT:

A refers to AI Artificial Intelligence. The core value of AIoT comes from the experience provided by AI behind the core device, rather than a large number of accessory devices. Deep Echo has also had a brief communication with Kevin Ashton, the father of the Internet of Things. He believes that the Internet of Things is a very complex and advanced automation process. The mobile phone is not just a mobile phone, but a connector.

However, the companies that are good at AI are lack of equipment. And they prefer to provide solutions and focus on the technology itself instead of occupying the whole system from the bottom up.

I refers to the Internet network. Internet giants who are good at online are also big players of IOT. Both Alibaba and Baidu have launched Internet of Things platforms. Taking Alibaba as an example, it focuses on chips, embedded systems, Internet of Things platforms, ET brain and industrial Internet platforms, while at the device level, limited by corporate genes, it relies more on external cooperation.

T refers to the Things (equipment). The Internet is lack of hardware, which is the base of hardware companies. It is because the entrance of AIoT is T, the data collector is T, and the application scenario is T that the hardware company has a natural advantage to start the layout.

In March 2019, TCL announced to enter the AI × IOT track in an all-round way. Wang Cheng, CEO of TCL's intelligent terminal business group, believes that in the next three years, only the manufacturers that produce a single category and cannot provide the connection and integration services for users will be out of the game. Only those that can provide a full category of intelligent terminals can become the ultimate top player. Hisense, another home appliance giant, has also launched a variety of products with the concept of AIoT.

The Internet of Things is not the hardware of the Internet. The combination of AI, I and T is the key to win in the competition. Xiaomi just stood at the intersection of the three key words.

From Xiaomi mobile phone to TV, to wearable devices and home appliances, there are a large number of Xiaomi ecological chain layout. These product matrices make large-scale device connection possible. At the same time, due to massive user purchases and uses scenario big data as support, it brings continuous effects to AI. The system application ability of MIUI \ AIOs can create good network ecology and user experience.

"We should turn the continuous advantages of AIoT and intelligent life into the absolute victory of the whole scene of intelligence, and thoroughly establish the leading position in the era of intelligence." ——Lei Jun's new-year cry is not unreasonable, and Xiaomi also has the confidence to fight in AIoT field.

This is an article from from WeChat official accounts Deep Echo (ID:deep-echo), written by Wang Xiange, translated by Chris Yuan.