Xiaomi this week signed a multi-year business collaboration deal with Nokia and also acquired unspecified number of patents from the Finnish company. If looked carefully, the Xiaomi Nokia deal speaks volumes of the Le Jun founded firm’s future ambitions. It is going to be one of those technology companies that can cater to all kind of customers – end users, enterprises and carriers – with all kind of solutions – smart products, technology solutions and network equipment infrastructure.
Since inception, little over 6 years, Xiaomi has been producing smart devices that included smartphones, laptops, consumer electronics and mobile apps. But for the company, this is a small portfolio and caters to just one part of the communications industry – end consumers. The other two parts of the business are still untouched – carriers and enterprises. Deals like that of Nokia or Microsoft are small steps towards that big leap for Xiaomi.
What’s In Nokia Xiaomi Deal
Primarily, there are three key aspects of the Xiaomi Nokia deal. One, both the companies have signed a cross licensing deal covering cellular standards; second, Xiaomi would acquire certain patents from Nokia; and third, Nokia would provide network equipment and transport solutions to Xiaomi.
Products : The first aspect of the deal would fulfill Xiaomi’s requirements in developing some of the ongoing as well as new communications products. This includes products related to Internet of Things (IoT) and 5G. Both the companies are betting big on IoT and this collaboration would help each other in bringing out connected devices well ahead of the competitors.
The Patent Business : The second aspect is about the patents. Before this deal with Nokia, it can be recalled that Xiaomi had a similar deal with Microsoft a year back to acquire over 1500 patents. As the company did not disclose the details about the current patent deal with Nokia, it would be difficult to say if the current Nokia patents are anyway linked to the earlier patents acquired form Microsoft. You know, Nokia was a part of Microsoft then!
Before Microsoft deal, Xiaomi had also signed a 3G, 4G patent deal with Qualcomm in late 2015.
“A license from Qualcomm will play an important role in helping us bring the newest and most innovative products to our growing customer base,” Xiaomi CEO Lei Jun had said then.
One of the key benefits of acquiring these patents, besides having a technolgical advantage, is to stay away from the ever increasing intellectual property rights related litigations. Xiaomi itself had fallen prey to it in the past with Ericsson. Also, these litigations might put a brake in Xiaomi’s foray into global markets like the US and Europe where IPR related litigations are frequent unlike emerging markets like India or Brazil.
Being A Networking Equipment Player :The third aspect of the Xiaomi Nokia deal is about Nokia’s equipment business. The company, according to the deal, will provide IP transport solutions and network infrastructure solutions meant for large enterprises and for data centers. This leads us to tow new areas. One, Xiaomi might enter into the telecom equipment space like Nokia, Ericsson and local players like Huawei and ZTE. For Nokia, it also means that the Finnish company will get a better opportunity to enter into Chinese market through Xiaomi where it faces stiff competition from its Chinese counterparts.
Own Chipset : 89% of lgobal mobile phones are based on chipsets manufactured by Qualcomm and MediaTek. Despite having a license agreement with Qualcomm, Xiaomi designed and produced its own chipset, the Surge 1, early this year and launched its first smartphone – Mi 5C – based on that. Though it will take a long time for the Chinese firm to entirely dependent on its own chipsets, nevertheless its a disruptive initiative for a 7 year old startup.
Being The Most Valuable Company
The recent Xiaomi Nokia deal indicates if there is any smartphone company that has the potential to unseat the global players like Apple and Samsung from their respective thrones, it has to be Xiaomi. Not only because it designs and develops great products but because the Lei Jun led firm is taking the right steps at the right time with his nerves well placed with the evolution of the industry and the requirements of the market. The only thing, perhaps, left for the company to compete with Apple is to provide customer services like that of the Cupertino firm.