Chinese electronics giant Xiaomi has made a name for itself selling impressive wear-resistant smartphones at aggressive price points. But the company has so far focused on low and medium phones as it mainly sells in China and neighboring countries. At an event in New Delhi, India today, the world's fourth largest smartphone maker announced an ambitious plan to expand offer and range.
Xiaomi announced a new venture called Poco, where it is planned to produce and sell high-end phones that would compete directly with the best deals from OnePlus and Samsung, two companies that have proven themselves well in what analysts call "budget flagship "smartphone segment.
To mark the debut of the new venture, today announced the first handset under the Poco umbrella, the Pocophone F1
In an interview with VentureBeat, Jai Mani, Product Manager for Xiaomi, which is part of the eight-member Poco team, says telephone exchanges often speak of a number of features that customers do not need. This makes a device more expensive than it may be, he said. With Poco, Xiaomi will only focus on features such as performance and battery life, which he believes is most important to customers.
Xiaomi has launched top-end phones like Mi 8 in the past, but those phones rarely left Chinese coasts. On rare occasions they launched their flagship phones in places like India, they went badly. Meanwhile, companies such as OnePlus, Samsung, Vivo and Oppo have gained significant foothold in the premium smartphone segment in India. The Pocophone F1, Xiaomi said, would be on sale in more than 50 markets in the coming weeks. Interestingly, the leaders told us that the company is not currently planning to sell Pocophone F1 in China.
Poco means little in Spanish, which emphasizes the company's global ambition, flexibility and scope within the company, and its obsession to focus on fewer things, said Alvin Tse, Global Manager of Poco, VentureBeat in an interview.
The company's head office in Shenzhen employs over 300 employees at R & D, software and hardware for Poco, said company executives at today's event. However, the Poco team lends resources from their parents as appropriate, they say, and cites the work of camera functionality as an example. Poco will also exploit Xiaome's logistics and services infrastructure, they said.
The Poco brand could help Xiaomi, which was recently announced at a lower valuation than expected, and increased revenue. Prior to IPO in July, the company said it would dampen net profit margins on smartphones and other hardware products to a maximum of 5 percent, a promise that worried analysts at the time.
By expanding its premium smartphone portfolio, the company can potentially look to increase sales. (As is the case with other smartphone manufacturers.) For Xiaomi, this surplus would be crucial. The company, whose founder and CEO Lei Jun has a vision of bringing "innovation for all" through its products and services, amounted to $ 1 billion in losses in the first quarter of this year. On Wednesday, the company reported a net profit of $ 2.1 billion, but also discovered an operating loss of $ 1.1 billion, attributable to IPO-related expenses.
Xiaomos Tse said that Poco would follow the company's five percent margin philosophy and added that one could argue that Xiaomi could operate with even lower margin for Poco. "The hope is that we can open up this new consumer need …. If we can offer them something compelling to a price point they have never imagined before, suddenly, many people will be interested in using the best technologies," he says. Mani remembered that people were skeptical when Xiaomi first started selling phones at a low price. "See where we are now," he said.
So why could not Xiaomi achieve this without the Poco brand? Mani said that the company felt it needed to start over and not worry about carrying the luggage or legacy to the big mark on the shoulders. Jayanth Kolla, founder of the consultancy firm Convergence Catalyst, gave a little more insight on that front. "Xiaomi has deliberately taken into account a particular geographical and socioeconomic consumer segment, and it has worked really well for them, "he said to VentureBeat, adding that deviations from this path could prove challenging. The company has largely sold handsets priced between $ 100 and $ 200, then asking an extra $ 100 for a handset could reduce his appeal among his loyal base, he said.
Advancing a brand or spinning a new company out of an existing company is something quite popular with Chinese phone makers. Huawei sells a number of medium-sized phones under the brand Honor, and Oppo has a suburb called Realme in India.
"This has been a proven strategy in the automotive market for decades," said Kolla. "A brand, especially from an Asian country, starts and gains momentum due to lower prices, but profit growth is diminishing because they can not break the upper ceiling prices, so they often resort to another brand building to attract this market." 
India, where Pocophone F1 was going to sell next week, could give us an early insight into how the market sees Xiaomo's new efforts. For the last four years, Xiaomi has aggressively expanded its reach in India by submitting competitive offers in terms of price and specifications. According to estimates from research companies IDC, Counterpoint, and Canalys, Xiaomi and Samsung, fighting for the telecom operator's phone position in India.
With almost no marketing, Xiaomi's presence in India, the world's second largest smartphone market, sells mid-range and low-end handsets with comparable specifications and features as competitors, but at much lower prices. In its early months, the company sold solely its phones through e-commerce platforms, cutting a chain of overhead costs. For years, Xiaomi has expanded its presence in India to include brick and mortar stores.
In many ways, Xiaomi, which offers an ecosystem of devices, including laptops, speakers and training equipment as well as software services, are among the handful companies that are able to place big bets. When asked if the company plans to launch more phones under the Poco brand and consider working with other devices, Mani said that the focus is on the Pocophone F1 for now, even though the company surely thinks of other ways.
Manish Singh is a technology reporter based in New Delhi, India. His work has appeared on CNBC, The Outline, Mashable and CNET.