Xiaomi faces hurdles in Korean smartphone market

Participants take a look at Xiaomi's budget smartphone Redmi Note 5 during a conferences at the Grand Intercontinental Seoul Parnas, Monday. / Yonhap

By Baek Byung-yeul

Chinese phone maker Xiaomi launched its budget smartphone here Monday, but the company will likely face many hurdles in selling its products due to Korean consumers' skepticism about its product's quality and after-sales service, analysts said Tuesday.

In a bid to target the highly competitive Korean smartphone market, Xiaomi rolled out its budget smartphone Redmi Note 5 with a price tag of 299,200 won ($266).

This is not the first time for the Chinese maker to sell its smartphones here, but it has failed to meet with more consumers here as it had sold its phones via only online shopping malls and third-party retailers.

To boost its sales here, Xiaomi came up with a different strategy this time -- selling its product through local telecom companies such as SK Telecom and KT. With mobile carriers offering subsidies, the price of the Redmi Note 5 could be lowered to 100,000 won.

G-mobi Korea, Xiaomi's local distribution partner, said it lowered the price of the Redmi Note 5 to meet with more Korean consumers. However, analysts pointed out Xiaomi's aggressive pricing is not likely to attract Korean consumers.

“Despite high price tags, many Korean consumers have purchased smartphones produced by Samsung or LG as they offer quality after-sales service. As their after-sales service centers are spread all over the country, Samsung and LG smartphones have been favored by Korean consumers,” said Ryu Young-ho, an analyst at Mirae Asset Daewoo Securities.

“However, Xiaomi has less than 10 after sales service centers throughout the country. This is a big minus point for the Chinese smartphone maker,” Ryu said.

Mobile payment will be another problem for Xiaomi. “The Redmi Note 5 doesn't offer a mobile payment feature like Samsung Pay or LG Pay. For smartphone users who are used to the mobile payment function, the Redmi Note 5 is not a good choice,” Ryu said.

“It also doesn't feature near-field communication (NFC), so consumers who are used to swiping their smartphones across NFC tags when riding buses or subways can experience inconvenience,” Ryu said.

Though the Redmi Note 5 has a competitive price, the analyst also pointed out it will be hard for Korean consumers to get used to Xiaomi's user interface.

“Xiaomi has its customized user interface MIUI, which is famous for its good custom interface when it comes to the Chinese version of MIUI. Xiaomi has offered instant updates for the Chinese version but not global versions. As it sells the Redmi Note 5 equipped with global MIUI, Korean consumers may face update issues,” the analyst said.

Another industry source, who declined to be named, also voiced that it won't be easy for Xiaomi to compete with Korean smartphones and Apple. “The Redmi Note 5 is well-packaged smartphone with an affordable price. But it has less brand awareness among Korean consumers so it won't be easy for Xiaomi to compete with Samsung, LG or Apple here,” the source said.