Doug Young

Corporate China | Weibo Talk: Xiaomi goes upscale; Sohu's Zhang deflects rumors

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Charles Zhang, founder of web stalwart Sohu.

Doug Young

Published: 12:30pm, 12 Jan 2015Updated: 12:31pm, 12 Jan 2015

The microblogging realm has been buzzing with posts from tech executives this past week, many of whom were hyping their products at a major gadget show taking place in Las Vegas. But back in China, smartphone sensation Xiaomi was generating its own usual buzz with hints that it may try to go upscale and challenge Apple (Nasdaq: AAPL) and Samsung (Seoul: 005930) more directly with a pricey new offering later this month.

Meantime, the microblogging realm also saw some unusual noise from two tech executives who have been mostly quiet in the space for more than a year. The loudest noise came from Charles Zhang, founder of web stalwart Sohu (Nasdaq: SOHU), whose microblog on Sina Weibo (Nasdaq: WB) suddenly came to life as he moved to deflect rumors about massive layoffs at his company. Meantime, Chinese Internet patriarch Lee Kai-fu also made a rare tech-related post on his microblog, breaking a prolonged period of relative silence since he returned to his native Taiwan for treatment of cancer.

Let's jump right into the latest microblogging buzz with Xiaomi, which I previously named as my China company of the year for its rapid rise to fame. Since its founding just five years ago, the company has shot to prominence as the first homegrown Chinese smartphone maker to develop a loyal following by positioning itself as a cool and trendy brand that sells and markets its products mostly online.

Xiaomi likes to compare itself to Apple, and began its life as a maker of mid-range smartphones. But since then it has moved downmarket with its line of low-end Red Mi phones that cost as little as 800 yuan (HK$1,011) and have been a flagship product in the company's global expansion. That move, combined with bloody price wars at home, have hurt margins for not only Xiaomi, but also many of its domestic rivals like Huawei and Lenovo (0992.HK).

But a new microblogging post from Sina (Nasdaq: SINA) vice president and tech watcher Wang Gaofei is hinting Xiaomi will try to move back upmarket with the launch of its newest product later this month. Xiaomi has already indicated it will launch its newest smartphone on January 15, and Wang suggests the company now has the name recognition and pricing power to sell phones costing 3,000 yuan or more, which would be squarely in the middle range.

Xiaomi is famous for leaking this kind of information before its official launches, and I wouldn't be surprised to see it unveil a mid-end model at this kind of price point at its launch event later this week. Frankly speaking, the company needs to go more upscale if it wants to truly become a global player and escape the bloody price wars taking place at the lower end of the market.