Xiaomi’s IP issue: A risk or an opportunity?

China’s top smartphone maker has a long-standing track record of alleged copyright infringements. As its mega IPO looms, will this be a problem or a favourable factor instead?
Xiaomi TV (left) and Apple TV (right)
Xiaomi TV (left) and Apple TV (right)

Xiaomi is known as China’s Apple.

For the superfans, this is a compliment to the Chinese smartphone giant. But to the critics, it is an ironic commentary on just how the eight-year-old startup rose to become China’s top smartphone seller: by following Apple's every move.

The Beijing-based company, which is now one of China's most recognisable homegrown consumer brands, is set to be the centre of attention of the global stock market next month after it launched its highly-anticipated initial public offering in Hong Kong, seeking as much as HK$48 billion ($6.1 billion) in what could be the world's largest IPO in nearly two years.

Besides the sheer size of the IPO, Xiaomi will also set a precedent as Hong Kong's first-ever company to list under the city's newly-implemented weighted voting right structure.

In the run up to Xiaomi's listing, the market is focused largely on questions of structure and valuation. The company originally planned to issue of China Depositary Receipts as a mainland-listed proxy for the Hong Kong shares, but announced last week that those plans were on the backburner.

Public discussions were also centered on whether Xiaomi, best-known for selling low-cost smartphones, is worth the $100 billion valuation it had sought . The firm appears to have back down on investor demand for a lower price and launched its IPO with an implied valuation of $53.9 billion to $69.8 billion – implying a discount of at least 30% over its target market value.

All of this has seemingly allowed the company to dodge awkward questions about its track record of designing products that are noticeably similar to those of the world’s most valuable brand, as well as some of its close rivals.

In fact, Apple’s chief design officer Jony Ive has publicly slammed Xiaomi for repeatedly copying Apple designs, calling it “theft and lazy.”

Apple is not the only “victim”. Ericsson, IKEA, MUJI and Jawbone, as well as Chinese companies Meizu and Coolpad, have all claimed their product designs have been replicated by Xiaomi.

Besides smartphones, Xiaomi is also alleged to have copied ideas on other products including TV boxes, tablets, bluetooth speakers and rice cookers.

In particular, Ericsson filed a lawsuit against Xiaomi for infringing on its patents and imposed an injunction against the sale of certain smartphone models in India. Chinese smartphone maker Coolpad said it had filed seven lawsuits of patent infringement against its bigger rival since the start of the year.

Xiaomi is perhaps the Chinese company that is involved in the most copyright disputes. As it stands, its upcoming initial public offering and its after-market performance will be a test of whether public investors consider copyright issues to be a drawback.


From product designs, similar-sounding names, an iOS-like skin on Android and near-identical marketing materials, it is clear Xiaomi mimics a lot of Apple’s ideas.

Xiaomi’s similarity to Apple is not confined to product designs. The way the company’s founder, Lei Jun, delivers its product presentations bears a striking resemblance to that of Steve Jobs – with characteristics including an old black T-Shirt, tattered jeans, and even the signature catchphrase “one more thing”.

Hugo Barra, Xiaomi's former international vice president, has said he was a huge fan of Apple and admitted the company took inspiration from great designs like those of Apple. But he also argued Xiaomi did not copy Apple’s ideas, but instead added its own design twist on top to create new products.

MUJI's rice cooker

Barra’s comments revealed the harsh truth that it is difficult to draw a line between copying and generating ideas. While two products could be 99% similar, they could never be truly identical.

In order to protect their intellectual property rights and avoid disputes, companies across the globe apply for patents and trademarks for even the smallest bit of their designs.

In China, however, weak enforcement of intellectual property laws means companies are less protected than in other developed countries.

Xiaomi is taking full advantage of such weakness. While being criticised as a blatant Apple clone maker, the Chinese firm has already overtaken Apple in terms of smartphone sales in China and turned into one of its main competitors as it expands globally.

For Chinese investors, Xiaomi’s ability to “generate ideas” through rival designs could, intriguingly, prove to be a positive factor to drive product innovation and support its share price. However, this goes against the fact global investors are demanding higher standards of environmental, social and governance behaviour among listed companies.

Xiaomi's rice cooker (named MIJIA)

For the second year in a row, New York-listed Alibaba was blacklisted by the US Trade Representative for allowing the sale of counterfeit products on its Taobao marketplace. As a product maker, Xiaomi perhaps poses a more direct challenge than Alibaba to the global effort to combat counterfeit goods.

Understandably, Xiaomi could alleviate part of the pressure over the copyright issue by listing in Hong Kong and, eventually, China, where investors generally have lower expectations for corporate governance. 

But as it becomes a smartphone giant itself, it is perhaps a good idea to build its own designs from scratch to avoid these accusations as the company moves forward.

In the short term, Xiaomi’s forthcoming IPO is poised to be a battleground between ESG supporters and profit-maximising stock market investors. The result? We will have to wait and see.

¬ Haymarket Media Limited. All rights reserved.
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