Documenti di Didattica
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EXPANSION PLAN
A PATENT PORTFOLIO ANALYSIS
GREYB SERVICES
Table of Content
Introduction 2
Acquisitions – The Secret Way Xiaomi Planned To Expand Beyond China 11
Founded in 2010, the startup quickly became a smartphone leader in the Chinese market. Its success was attributed to its innovative
e-commerce tactics -- gave it a kind of first-mover advantage and a rise in the demand for smartphones. The success party, however,
didn’t last long as others started using the same tactics and rolled products with similar features and price ranges.
As a result, it lost its Chinese market share of the smartphone to companies like Oppo, Vivo, and Huawei. Xiaomi soon realized that the
Chinese smartphone market has become saturated and in order to keep the pace of growth, it needs to expand globally into markets
that are yet to be saturated.
In 2012, the sales numbers increased by 2400%, with the launch of Xiaomi 2S and 2A models, which were a significant improvement
over its predecessors. With the addition of flagship models with improved features at stunningly low costs, the sales soared
exponentially and by the end of 2013, Xiaomi was valued at $10 billion.
Sales figures from 2015 came as a disappointment as Xiaomi sold merely 70 million phones that year, which though was an
improvement over previous year’s numbers, fell short of their speculated sales target by 10 million.
The most valuable startup in the world (now dethroned by Uber) knew well that global expansion was the key to achieving the top
spot. If they wanted to soar higher in the consumer electronics market, they needed to expand beyond China, especially in the USA.
Before reaching its Zenith, Xiaomi had already forayed into other Asian markets including Singapore, Malaysia, Philippines, Indonesia,
Hong Kong, Taiwan, and India, with plans to expand to other international markets as well.
On June 30th of 2015, Xiaomi made its first foray into the international market by expanding its operations to Brazil, with the launch of
Redmi2.
Earlier, the company had slowed down its expansion plans in order to learn more about each market it enters. But that was no longer
the case. Xiaomi entered the swift expansion mode. In November 2015, they expanded sales to the African continent: Specifically
Kenya, Nigeria, and South Africa.
Similarly, in the US, it received a not-so-warm welcome with a patent lawsuit by Blue Spike over its upcoming devices MI 5 and MI 5
plus.
Even in its home country, China, Xiaomi couldn't avoid patent lawsuits. The recent allegations of Yulong Computer Communications
Technology (Shenzhen) Co. Ltd, owned by Coolpad Group, has put Xiaomi in another lawsuit for infringing Coolpad's 3 patents related
to smartphone app icon management and other UI elements. The lawsuit was filed on 26 January 2018 in Guangdong Province
Shenzhen Intermediate People’s Court.
Though Xiaomi yearns for global expansion, it lacked a strong patent portfolio. And to top it all, most of its products resemble other
existing products. For instance, in 2014, Mashable called out MIUI (Xiaomi's customized version of android) a blatant iOS ripoff.
These all factors in unison made it imperative for Xiaomi to boost its patent portfolio by acquiring third-party patents – which was long
anticipated. Broadcom, a semiconductor company based out of the US, transferred 19 patents to Xiaomi, pinpointing an assignment of
the USPTO.
With all these factors in mind, and to answer a few questions that were in our curious head, we accessed the patent portfolio of Xiaomi,
which has been filing patents since 2009, to see what the Chinese Apple is up to in terms of innovation.
Here’s a chart showing how Xiaomi’s patent filing grew over the course of the past few years:
Xiaomi filed its first two patents on 27th Dec 2010. The third patent of 2010 in Xiaomi’s portfolio was originally filed by China Academy
of Telecommunication Technology. Other than 3 Chinese patents, Xiaomi also has 8 US patents dating back to 2010, which originally
belonged to LSI Corporation (which was acquired by Avago Technologies in 2013, which later merged with Broadcom Corp).
In 2011, Xiaomi added 59 patents to its portfolio. Out of these 59, 14 patents belonged to Broadcom Corp (more details in a later
section) and the rest were filed by Xiaomi itself.
“We're building our own portfolio of patents for defensive purposes, because you kind of have to have that. Think of it as
a war chest of sorts. We've filed over 2,000 patents, which is actually a lot, and we're acquiring patents”, Hugo Barra in
one of his interviews with Bloomberg.”
Of course, we intend to gain space in those major markets, U.S. and Europe, but we’ll only try it when we feel stronger
and more mature. – Hugo Barra
Europe with 1542 patents is the top third country where Xiaomi holds the maximum of its patents, followed by Japan at the fourth spot
with 933 patents. Interestingly, in our previous update of this article, Xiaomi only had 408 patents in Europe with no news about when
they were planning to enter the market.
Xiaomi earlier was only selling accessories like headphones, fitness bands, and power banks from May 2015 using their retail stores.
You could say that it was an attempt to build the market interest until they work on a stronger patent portfolio to finally make a big
splash using their smartphones.
After 2 years of waiting, their portfolio grew stronger, Xiaomi felt enough confidence to enter Europe’s market by placing their first step
in Madrid, Spain. The company launched Mi Mix 2 and Mi A1 smartphones in November 2017 in an event held in Madrid.
Next on the list is South Korea, where consumers have an appetite for the high-end smartphone at cheaper prices, which was vital for
Xiaomi’s sales expansion outside the home country.
Interestingly, in an attempt to enter Korean markets, with 144 patents in its arsenal at that time, Xiaomi launched its first smartphone in
South Korea on 4 January 2015 through mobile carrier KT Corporation. A couple of days later, on January 6, Xiaomi pulled back its
smartphones from the Korean Market due to some legal matters, according to a report by the Korean Times. Speculations were that
lack of Korean patents might be a strong reason beneath the matter.
India with 900 patents sits at the sixth spot followed by Russia at seventh with 785 patents. Xiaomi’s progress in India has been
tremendous after the pullback that occurred with Ericsson’s lawsuit against them.
Xiaomi overtook Samsung in 2017 and became the top smartphone company in India. Looking at just this year, they sold more than 10
Million devices in the 2nd quarter of 2018, a number that was never achieved by any smartphone company before. Even in 2019, the
company had the biggest market share in India followed by Samsung.
As we have already talked about how their portfolio has grown at a different pace in different countries. Here’s a table to show you a
full timeline of Xiaomi’s patent portfolio growth globally.
Just as we said earlier, 2 years ago it would have been but maybe not now. Now though, Xiaomi dedicated efforts to expand their
patent portfolio prove that they understood the importance of having an IP strategy in place to foray into global markets.
From 4702 patents in Jan 2016 to more than 28,000 patents currently (as of 20 march 2020), mostly by filing and partly by
acquisitions, Xiaomi had significantly beefed up its portfolio. The company made some sizable patent acquisitions that would remove
some thorns from the path on its way to global expansion.
Having said that, let’s see the list of acquisitions that Xiaomi did to beef up its patent arsenal:
As Qualcomm was facing some inevitable complications in China, the technology transfer was a major negotiation to the situation for
Xiaomi. This led Xiaomi to Leadcore Technologies, a subsidiary of Datang Telecom and a renowned smartphone chip manufacturer in
China.
In Nov 2014, Leadcore Technologies entered into a $US16.8 million deal with Beijing Sunggao Electronics, which according to
TechWeb is a company controlled by Xiaomi. The purpose behind the deal was the acquisition of Leadcore’s core technology patents,
reads a report by QQ.
The extracted patent portfolio of Xiaomi revealed the acquisition of 30 patents. These patents cover 4G and other chip-related
technologies.
In Apr 2015, Ninebot Inc., which claims itself as the first smart short transportation equipment operator in China, acquired Segway. As
per a report by Bloomberg, the purchase also added 400 patents of Segway into the portfolio of Ninebot, parts of which are owned by
Xiaomi.
In Oct 2015, Ninebot launched its first self-balancing scooter with which Xiaomi embarked on the field of transportation gadgets.
At the time of this acquisition, Ninebot was under patent lawsuits filed by Segway and Inventist. Being an emerging startup in the
self-balancing vehicle industry, their patent portfolio was just as weak as Xiaomi had in its early days.
This acquisition was an exceptional strategic move by Ninebot; with the financial help of Xiaomi, they acquired Segway and freed
themselves from the lawsuit. Another benefit was, they now had enough patents in their arsenal to counter sue Inventist (The Company
with the first patent of Hoverboard). You can read the entire patent battle of the Hoverboard industry and how a single patent just
turned it upside down, from here.
In October 2015, Broadcom Corporation assigned 20 patents to Xiaomi. Most of the patents covered in the deal were of the wireless
communication domain. Oblon was the law firm involved in this assignment.
Qualcomm, in December 2015, announced signing a patent licensing agreement with Xiaomi under which the latter will be paying
royalties for its 3G and 4G smartphones. The deal helped Xiaomi include one out of two types of patents – related to wireless
communication –in its arsenal. The other types of patents Xiaomi is seeking is of smartphone designs and features.
In 2014, an Investment subsidiary of Xiaomi, Tianjin Jinxing Investment, invested 4 million Yuan in Guangzhou Femini Electronic
Technology which later filed 27 patents in collaboration with Xiaomi.
These patents also appeared in our extracted patent sets. From further analysis, we found the patent set disclosing technologies
related to aircraft shock absorbers, remote control, design structures and the like.
This patent collaboration adds weight to Xiaomi's announcement of launching its first camera drone in 2016.
Patent Assignment deal with Foshan Gales Electrical Appliance Technology Co., Ltd.
Xiaomi already has a strong presence in providing smart home products, like air & water purifiers, smart webcams, and routers. In
order to expand its intellectual property in this domain, Xiaomi has bought 104 patents from Foshan Gales Electrical Appliances. The
company is a major manufacturer of home products like Juicers, water dispensers, etc.
In December 2016, News surfaced about a new deal among Xiaomi and Intel. Intel, which is highly active among US companies to
penetrate Chinese Semiconductor markets earlier entered into a strategic partnership with Chinese semiconductor company Rockfit,
while having a significant stake in Tsinghua Unigroup- the company that owns domestic chipmakers Spreadtrum and RDA.
The deal with Xiaomi was two-fold. According to a report by Digitimes, in early December, on the quest to land Xiaomi as a major
client, Intel introduced a free chip deal. For every notebook processor Xiaomi purchased, Intel gave away a free tablet processor. This
move was speculated to be an attempt so that Xiaomi would consider ordering Intel-based smartphone solutions too.
Further to sweeten the relations between the two companies, the semiconductor giant transferred the ownership of 332 patents to
Xiaomi. Most of these patents were originally assigned to Intel whereas some of these were owned by LSI, another semiconductor
company, whose networking business was acquired by Intel from Avago(A Broadcom Corp company), who originally acquired LSI in
2013.
To sell its handsets in the US market, Xiaomi signed a big deal with Microsoft to remove some obstacles from its US invasion plan in
2017.
The cross-licensing and patent transfer deal among the companies involves the acquisition of 1500 of Microsoft’s patents from its
global portfolio, for which Xiaomi is believed to have paid $40 million.
Though the deal is official, Microsoft has yet not assigned the patents to Xiaomi yet. According to a report by Reuters, the patents
belong to domains including voice communications, multimedia, and cloud computing.
In September 2016, News surfaced that Xiaomi quietly absorbed Ruichuan IPR funds, a government-backed Chinese patent-holding
company.
The two-year-old government-sponsored company was known to be seeded with $50 billion to acquire patents that could be used in
action against US competitors. Xiaomi was known to have a sizable stake in the company, which was attempting to build a massive
arsenal for use in harassment litigation.
Though it remains unknown on the kind or number of patents the company has, it would be an interesting addition to Xiaomi’s portfolio
knowing its interest in global markets.
While the talk is on global expansion, it would also be interesting to note the companies that Xiaomi would consider acquiring to
succeed in its quest. While there are a lot of potential candidates ripe for acquisition, two names top the list considering the IP
advantage they would bring to Xiaomi’s portfolio.
Since the inception of Xiaomi's global expansion plan, it has been into a lot of patent deals that helped it build a strong patent war
chest. Its patent portfolio, however, is still incomparable to competitors like Samsung. To bridge the gap, Xiaomi’s efforts are on and
the patent deal with Nokia is an effort in that direction.
Besides the patent acquisition deal, Nokia also revealed that the company has signed a cross-license deal with Xiaomi for cellular
standard-essential patents.
On July 6, 2016, Xiaomi bought patents from Casio, one of the most famous Japanese consumer and commercial electronics
manufacturers that has been in the industry for more than 60 years. Casio has a wide range of products from calculators to musical
instruments. They were the first company to build an all-electric calculator.
The patent assignment deal consisted of 59 US patents the majority of which were covering camera and image processing
technologies. This acquisition will surely add fuel to Xiaomi’s pursuit to enter the US smartphone market.
This was the first patent related news that popped up this year from Xiaomi. After a long break of almost a year, Xiaomi returned to
their acquisition quest in August, when they acquired about 350 patents from Philips.
IAM media reported on this assignment first mentioning the lack of Chinese patents in the deal. The assignment contained about 130
US patents and dozens of patents from other countries including Japan, India, South Korea, Russia, and Turkey.
We analyzed the patents involved in this transaction and almost all of the assets are related to displaying technologies, especially
OLEDs. Analyzing their entire portfolio could reveal more insights about how this transaction will add value to their product line, other
than strengthening their patent portfolio.
Want us to dig deeper? Reach out to us here to get the full analysis conducted.
Recently in September Xiaomi entered into an agreement with Japanese Telecom giant NTT Docomo for a global license of their 5G
standard-essential patents. This agreement will help Xiaomi in building a 5G compatible device, which most of the market leaders like
Samsung, Apple are already working on too.
In Nov 2018, Xiaomi found itself in another deal and perhaps it made things easier for both of the parties. Xiaomi took over the
hardware business of Meitu, a smartphone company that also has expertise in the software field as well particularly in image editing.
As per the deal, the future smartphone will have the Meitu brand but Xiaomi will be responsible for the whole production such as
research and development, design, and sales. Meitu technology will help Xiaomi to make more selfie-focused smartphones and Xiaomi
brand will help Meitu to enter the bigger market.
Considering the tough competition other players like Huawei, Vivo, Lenovo poses, Xiaomi realized that Global expansion is the only
way to stay ahead. In order to achieve its goals, Xiaomi has an actionable IP strategy that might open doors to opportunities in the
global market.
But it is worth noting that despite having a sizable portfolio; Xiaomi has not made it to its top position. Why?
Xiaomi’s rise was based on one simple advantage: It offered premium hardware and features at a fraction of what Apple or Samsung
offers. But as soon as other Chinese manufacturers entered the market offering premium specifications at low prices, the danger was
imminent.
Further, the competitors didn’t just manufacture premium devices at low costs, albeit added features that gave them an edge. For
instance, Vivo offered curved screens, LeEco offered Exclusive content, and Huawei offered dual-lens camera and fingerprint sensors
in its handsets.
Xiaomi on the other side, despite having a sizable portfolio failed to take advantage and that serves as one reason beneath its small
market share.
A strong portfolio, a huge fan base, holds over some pretty strong markets, what should Xiaomi do next to emerge as a leader?
Leverage its IP and Innovate. That is how Xiaomi could up its game.
Though Xiaomi had been taking steps toward reaching its goal, the road ahead isn’t really easy. With President Trump insisting on
manufacturing products in the US itself and Huawei ban, Xiaomi might lose the low-cost advantage it offers if it has to start
manufacturing its products in the US once it enters the market.
No matter what the case, US Expansion or not, Xiaomi won’t become a market leader if it continues to play on its low-cost advantage.
Rather, it should take advantage of its beefed-up portfolio and bring innovative products to market that would ensure its success.
Authored By: Nitin Balodi, Team Lead - Market Research and Shabaz Khan, Sr. Research Analyst - Market Research