Xiaomi won’t suffer the suffocating supply chain bans of Huawei—at least, not yet.
The latest shot in the US Government’s war on leading Chinese smartphone vendors is directed at Xiaomi, which today has landed on the US government’s list of “Communist Chinese Military Companies” via a new executive order. The declaration makes it illegal for US citizens to own Xiaomi stock.
The US and China have been trading blows for a year and a half now over Huawei, which was added to the “entity list” by the US Department of Commerce. While on the entity list, American companies can’t collaborate with Huawei or export products to it. It becomes illegal for Huawei to import any product of “US-Origin.” US Origin doesn’t just mean products made in the US by US companies; there’s also a “viral” component to the law, where any product made internationally with some US-origin components also counts as a US-origin product.
While Huawei got an all-encompassing ban, it doesn’t look like Xiaomi is in the same boat right now. Huawei landed on the Department of Commerce’s entity list, while Xiaomi is now on the Department of Defense’s list of “Communist Chinese Military Companies” (Huawei is also on this list). The DOD designation seems to only ban US investment in Xiaomi, and any American stakeholders need to divest their holdings by November 11, 2021. (Xiaomi is a public company and had an IPO back in 2018.) The suffocating supply chain restrictions that apply to Huawei don’t (yet?) apply to Xiaomi.
The DOD says the list is meant to “highlight and counter the People’s Republic of China’s (PRC) Military-Civil Fusion development strategy,” which the government says is a plan to funnel advanced technology to the Chinese Military through “PRC companies, universities, and research programs that appear to be civilian entities.”
Xiaomi has issued a response on Twitter, saying it “is not owned, controlled, or affiliated with the Chinese military, and is not a “Communist Chinese Military Company” as defined by the NDAA” (the NDAA is the National Defense Authorization Act that gives the DOD the power to make this list).
The IDC has Xiaomi as the number 3 smartphone manufacturer worldwide, behind Samsung and Huawei, and a spot ahead of Apple. Xiaomi regularly pumps out high-spec, low-cost Android phones to compete in the cutthroat Chinese and Indian markets. It started life as an Apple clone maker, but today Xiaomi is one of the fastest movers in the industry and regularly beats bigger companies in shipping new technologies and components to the market. It shipped the world’s first Qualcomm Snapdragon 888 phone, the Xiaomi Mi 11, and it’s leading the charge in under-display cameras. Being Chinese is a market advantage for Xiaomi. A company like Apple has to have US designers communicate to Chinese manufacturing across a 12-hour time zone difference and a language barrier, while Xiaomi’s Chinese designers and Chinese manufacturers can communicate more easily and quickly, allowing the company to develop products faster.
As Xiaomi may be the number 3 smartphone manufacturer worldwide, any kind of ban on the company in the US isn’t going to do much. Years ago, Xiaomi gave hints about entering the US smartphone market, but it never had the stomach to go through with it and instead only launched the US version of Mi.com as a seller of small accessories. In the US, you can buy a Xiaomi Android TV box, headphones, security cameras, and battery packs, along with stranger things like air purifiers, light bulbs, and toy robots.