China's Xiaomi makes $300 million investment in Baidu's online video site

The company is also expanding internationally, with India its main target

Although better known for its smartphones, China's Xiaomi is spending big to prop up its fledgling smart TV business, with a new investment in an online video company belonging to Chinese search engine Baidu.

The handset maker and a related fund called Shunwei are investing US$300 million in the Chinese video site iQiyi, according to a company post on Wednesday. As part of the investment, Xiaomi and Chinese search giant Baidu will "deepen cooperation" on products and content, especially on the mobile Internet front.

The fast-rising Xiaomi has quickly become one of the top smartphone vendors in the world, thanks largely to its sales in China. But it has also ambitions of offering an entire eco-system of hardware, including tablets, set-top boxes and smart TVs.

Earlier this month, Xiaomi declared it would spend US$1 billion to build up its TV content, leading it to later buy a stake in Youku Tudou, a major video site in China.

On Wednesday, the company's CEO Lei Jun also talked about the its smartphone goals, and said he hopes Xiaomi will eventually surpass Apple and Samsung to become the number-one player in the market.

Lei, however, doesn't expect that to happen soon: it could take five to ten years, he said at the World Internet Conference in Wuzhen, China.

In the short term, the Chinese company wants to double its user base to over 200 million within the next year or two, he said. As of now, Xiaomi has 70 million users of its customized version of Android called MIUI, which is installed on the company's tablet and smart TV products as well as on its smartphones.

In this year's third quarter, Xiaomi was ranked as the third biggest smartphone maker globally, according to research firm IDC. The company began selling phones a little over three years ago, but it has become one of the hottest vendors in the country, partly by selling handsets at prices far below rival products.

Competition in the market, however, is stiff. Apple and Samsung Electronics have been the two leaders, but PC maker Lenovo is also expanding fast. Like Xiaomi, Lenovo has also grown quickly to become a top smartphone vendor in China, and just last month the company completed its acquisition of Motorola Mobility, giving it a foothold in the U.S. market.

After the acquisition was made final, Motorola's president Rick Osterloh tweeted that Lenovo was now the third biggest smartphone player.

Although Xiaomi phones are mainly sold in China, the company has been expanding internationally by selling phones in Southeast Asia, and in India, which its CEO described on Wednesday as its "main attack" target.

So far, Xiaomi phones have proven to be popular in the country. The products, while offered in limited stock in India, have been appealing enough that they've often sold out within seconds of becoming available.

Xiaomi, however, has yet to crack the top five rankings in India's smartphone market, according to research firm Canalys.

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Michael Kan

IDG News Service
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