Xiaomi Acquires Loss-Making Smartphone Manufacturer Meitu in Part
Xiaomi has taken over a loss-making brand. Why you might wonder. With Meitu, the company hopes to acquire more expertise for camera hardware, possibly to use it in its own smartphones.
Sometimes you are really amazed at the acquisitions that take place worldwide. Today, the world’s third smartphone makers Xiaomi has chosen to take over a Chinese smartphone manufacturer that has been loss-making for years.
Meitu is focused on the development of camera techniques, specifically for making the ‘best’ selfies, so the company has a similar goal as competitor OPPO. That Xiaomi is about to take over the manufacturer can be a smart move; Xiaomi has for years been struggling to keep track of its techniques for the cameras on their devices. Although the quality has improved a lot in recent years, the company still cannot compete with manufacturers such as Apple and Samsung.
Meitu is experiencing financial difficulties and expects that by the end of this year, net loss will jump from $28 million in 2017 to somewhere between $137 million and $ 173 million. The difficulties are explained by the launch of only one Meitu smartphone in 2018 against five released last year.
The alliance between Meitu and Xiaomi
Both companies call the acquisition of a strategic partnership. Meitu will offer its brand name, techniques and hardware to Xiaomi for a limited time. Xiaomi will take care of the design, research, development, and sale of future Meitu branded smartphones. However, Meitu will continue to be involved in the development of software dedicated to the camera.
Meitu explained that its mission is to inspire people to express their beauty and that the strategic alliance with Xiaomi is the best way to continue pursuing this goal. At the moment, the company is not yet a significant competitor in the smartphone world and the last five years has sold only 3.5 million devices. Cooperating with Xiaomi could allow the brand to grow and get more brand value.
The strength of Xiaomi lies in its ability to diversify its product portfolio – both those marketed under its own brand and those distributed with other brands controlled in a more or less direct way. In this way, Xiaomi can propose devices intended for gamers (Black Shark) as well as great selfie smartphones that aim to offer the best price-performance.
An opportunity to increase the popularity of the brand
Initially, Xiaomi will pay Meitu a percentage of the sale of smartphones, but once five years have passed or a certain number of devices have been sold, the payment method will change. Xiaomi will initially pay Meitu under a new contract to 10 percent of the gross margin produced by the phones once the phones have reached a certain amount of sales. After the completion of certain amounts, the licensing fee will change to fixed prices.
Meitu claims that the agreement will allow it to expand its user base on social networks thanks to pre-installed software on mobile phones. It is currently not clear whether the Chinese company’s applications will also be present in Xiaomi’s classic smartphones, such as the Mi 8 and the Pocophone.
Outside China, Meitu has gained a lot of popularity thanks to a selfie application designed to make each self-timer look like a drawing straight out of a manga. The app also offered some simple photo-editing features.
It remains to be seen whether the future Meitu phones developed by Xiaomi will be invested especially in the selfie division. Last year, Meitu V6 already had two cameras in front, and this year, the new Meitu phone will have three front cameras.
With the deal, Xiaomi will gain not only by enjoying these advances in its own handsets but by having a subsidiary that should facilitate the experimentation of new technologies and the expansion of its business in a new market. Meanwhile, Meitu will be able to focus on the development of new imaging resources, something that it already does very well today.