Little Rice

Smartphones, Xiaomi, and the Chinese Dream

Clay Shirky

• Publisher: Columbia Global Reports
• Year: 2015
• ISBN:
  9780990976332
• Topic: Technology & Engineering
• Subtopic: Electrical Engineering & Telecommunications
• Index: Technology & Engineering

Almost unknown to the rest of the globe, Xiaomi has become the world's third-largest mobile phone manufacturer. Its high-end phones are tailored to Chinese and emerging markets, where it outsells even Samsung. Since the 1990s China has been climbing up the ladder of quality, from doing knockoffs to designing its own high-end goods.Xiaomi — its name literally means "little rice" — is landing squarely in this shift in China's economy. But the remarkable rise of Xiaomi from startup to colossus is more than a business story, because mobile phones are special. The common desiderata of the global population, mobile phones offer the kind of freedom and connectedness that autocratic countries are terrified of. China's fortune and future clearly lie with "opening up" to the global market, requiring it to allow local entrepreneurs to experiment.Clay Shirky, one of the most influential and original thinkers on how technological innovation affects social change around the world, now turns his attention to the most populous country of them all. The case of Xiaomi exemplifies the balancing act that China has to perfect to navigate between cheap copies and innovation, between the demands of local and global markets, and between freedom and control.

Smartphones

A couple of years ago, while I was doing some work at NYU’s Shanghai campus, I got lost on the subway. As a New Yorker, it takes a lot to make me feel like a country mouse, but at triple the population of my hometown, Shanghai does it. Even though the Shanghai subway system is amazingly well-provisioned with directions in English, I got out at the wrong stop. I didn’t figure this out right away, because the subway exited into a mall, just like at my stop, and Shanghai has so many malls—36 million square feet of retail space will be built this year—it can be hard to tell one from another.

Walking in a daze through a vast collection of hallways and shops, I did the very thing people who build confusing malls wanted me to do: I slowed down and started looking around, whereupon I noticed a booth selling mobile phones, a thing I happened to need at the time. I saw a particularly nice one, all black, rounded sides, quite stylish, whose logo read Mi3. I decided that a Mi3 would be as good a phone as any, so the vendor and I did that curious pointing and gesturing thing people do when transacting with no common language except money, and ten minutes later, I had my phone.

There is not much a middle-aged guy can do to seem au courant to eighteen-year-olds, but that phone did it. For the next several days on campus, whenever I needed to do anything on my phone, one of the Chinese students would ask, “Where did you get that?” Not, “What kind of phone is that?”—they all recognized it. The Mi3 was a huge hit for Xiaomi, the startup that made it, selling faster than the company could produce them. I had managed to get my hands on a phone so popular, the company couldn’t always keep up with demand, making me briefly the envy of teenagers (not a familiar feeling, before or since).

Xiaomi (pronounced like the “show-” in shower, plus “me”) is the thing that many people in the West don’t think exists: a company that can create products that aren’t only made in China, but designed in China, and beautifully so. For decades, the rap on Chinese manufacturing has been, “Oh sure, they can make lots of copies cheaply, but they can’t design new products.” Over the forty years that China has been open for business, the country’s manufacturers have mastered increasingly complex sourcing and assembly for increasingly complex products, especially electronics. (The iPhone box may say “Designed in California,” but it is built in Shenzhen.)

For anyone watching this rising mastery of quality, the question has become, “When will Chinese design rival its counterparts in the rest of the world?” Owning a Mi3 made it clear that, at least for electronics, the answer was “2013.” It was of high quality and moderately priced—more expensive than most smartphones, but at 2000 yuan (about $330), it was cheaper than a similar Samsung, at around $400, and much cheaper than an iPhone, at over $500—but those virtues are virtues of purchasing and assembly. The Mi3 is also beautiful.

All smartphones are a slab of black glass with three or four buttons on the case, so phone design tends toward rearranging these minimal elements. The Mi3’s minimalism was to make a thin phone seem even thinner by making the screen look as if it ran from one edge of the phone to the other. On many of Xiaomi’s early phones, and most strikingly on the Mi3, the edges of the phone case curve away so sharply from the screen that the eye discounts them as part of the same surface. This was a trick, of course—you can’t make a cheap phone if the case doesn’t stick out past the screen—but it was a good trick, and more importantly, it was a trick that meant that people inside Xiaomi were thinking, very carefully, about what a good phone would look like.

The mobile phone is a member of a small class of human inventions, a tool so essential it has become all but invisible, and life without it unimaginable. The common desiderata of the world’s adult population (and of most of our children), the mobile phone is the site of a steadily increasing amount of the world’s communication, from selfies to contract negotiations. Jan Chipchase, an ethnographer who has studied the use of mobile phones worldwide, points out that there are only three universally personal items that someone will carry with them no matter where they live. The first two are money and keys; the third is the mobile phone, making it the first new invention added to that short list in three thousand years.

Since launching in the late 1970s in Japan, mobile phones have become the fastest-spreading piece of consumer hardware ever, faster than automobiles or fixed-line phones or even televisions. Because individual wires do not have to be run to individual houses, and because the cost of the handset is shared with the user, mobile phones are far cheaper to deploy than fixed lines, and thus often connect populations that never had connection before. American teenagers have long insisted that they couldn’t live without their phones, but this phrase has real meaning in the developing world, where the kind of information you get from a phone can have a profound effect on the quality of life: Fishermen in Kenya use phones to figure out where they can sell their catch, parents in India use it to locate doctors in other towns, and so on. Mobile phones may be a big improvement over fixed phones, but they are a gigantic improvement over no phones at all.

This dramatic change in what is awkwardly called teledensity is now almost universal. The number of mobile phone users crossed 4.5 billion last year, and because of dual accounts, there are now more mobile subsciptions in the world than there are people. In sub-Saharan Africa, mobile phone penetration is around 66 percent in 2014—two subscriptions for every three people in a region where the phone network extends much further than the electrical grid, leaving it to small-business people to sell phone-charging services using car batteries. Penetration for the world’s heavily indebted poor countries—HIPC to the United Nations, the poorest of the poor to you and me—is only just behind at 58 percent, or three mobile subscriptions for every five people, in countries with barely functioning economies. Meanwhile the countries with the lowest penetration are there not because of lousy economics, but repressive politics. North Korea, Myanmar, Eritrea, and Cuba are the only populous countries with less than 25 percent adoption. Absent direct repression by the state, the citizens of the world are adopting mobile phones at a torrid pace.

All these phones have to be made someplace, and that place is China (as with most things that get made). Of all the things made in China, some are culturally specific enough to resist export; the global market for busts of Chairman Mao isn’t all that much larger than the Chinese market. Others are universal; there is no country-specific version of a 5 mm screw or a Hello Kitty pencil. In between the Chinese-only products and the universal ones, though, are products that could go either way, products made in and for the Chinese market, but which might become global exports. Mobile phones straddle this divide.

Most mobile phones are made in China, of course, but some are made for China. There are the cheap knockoffs, part of China’s tradition of shanzhai manufacturing. Shanzhai refers to mountain villages that make their own goods, and carries the sense of inexpensive and expedient production, including a less than robust concern for patents and trademarks. Some of these goods are simply cheap, barely functional phones, but some are copies meant to look (at least at a distance) like their more expensive inspirations. At the open-air electronics market on Baoshan Street in my adoptive town of Shanghai, these copies take dozens of incarnations. Samsung is a favorite recipient of this flattery, with knockoffs bearing logos like San Song and Svmsmvg. These phones tend toward national markets; neither the Svmsmvg nor the San Song will spread much outside China. Other lures for selling cheap phones are used elsewhere; the Kenyans were offered an Obama-branded phone a few years ago, but it’s not a strategy for all markets.

Then there are the phones designed for East Asian sensibilities. The same region that brought us the selfie stick also brought us Oppo, a company whose phone’s principal selling points include a high-quality camera and custom software that automatically airbrushes photos with faces in them. The ad campaigns emphasize a particularly performative form of femininity, since, in a nice touch, the software makes a guess about the gender of the subject—everyone gets smoother skin, but only the ladies get their lips reddened. Despite successful rollouts in Thailand and Korea, Oppo has not made much of a dent in markets outside East Asia. Their U.S. launch was a bust.

Mobile phones, in other words, have mostly been just another Chinese export—the cheap products for poorer markets are thrown together at minimum cost, while expensive products for the increasingly global group of well-heeled customers are designed elsewhere, whether in Seoul or San Jose, the pattern that led Apple to add the phrase “Designed in California” to its packaging in the first place. This pattern of “designers elsewhere, manufacturers here” has been the norm since the British turned southern China into their workshop in the 1800s, but it is starting to shift. A number of Chinese companies are moving to do everything at home, working to create mobile phones where “Designed in China” means quality, not just shanzhai. (This is the same path famously trod by Sony in the 1970s, when its founder was determined to retire “Made in Japan” as an insult.) The most successful of these new design-oriented companies, and therefore one of the most important mobile phone manufacturers in the world right now, is Xiaomi. Xiaomi is the first Chinese phone manufacturer to compete, globally and successfully, not just on price but on innovation in design and service.

The full name of the company is Xiaomi Tech but everybody just calls it Xiaomi, not unlike everyone saying Apple back when they were still Apple Computer. (The parallels between Xiaomi and Apple are one of the constant themes of discussion around the company, and a sore point for the founder.) The literal translation of xiao mi is “little rice,” the Chinese word for millet. The theme of grain exists in their product branding—their current line of cheaper phones is called the Hong Mi, meaning “red rice,” and millet itself is a cheap grain, harkening back to the Chinese revolutionary slogan “millet and rifle,” indicating an army willing to live on a subsistence diet.

Xiaomi, founded in Beijing in 2010 by Lei Jun, a computer scientist and charismatic serial entrepreneur now in his mid-forties, has accomplished a lot in half a decade. Even just looking at its sales figures, the superlatives pile up. In its short life, it has gone from a startup focused on making a new mobile phone interface to beating Samsung as the number one phone vendor in the largest market in the world in 2014. Its products are so popular in China that it has become the third largest ecommerce firm there just selling its own products, after the general marketplace sites Alibaba and JD.com, and ahead of Amazon.cn.

As the company has adopted increasingly international aims, the name became something of a liability—few English speakers are used to pronouncing words that begin with an “x.” So it changed its public face to emphasize Mi as its brand, including buying Mi.com last year for $3.6 million, one of the most expensive domain name acquisitions in Chinese history. (Richard Liu, an early investor, winces while recalling the purchase, as he’d been an early supporter of the Xiaomi name, one of the few missteps the company made on its way to a global market.) The company says Mi refers to “me,” to mobile interface, and to Mission Impossible. Enthusiastic Mi users are called Mi Fans in English, and Mi Fen (“rice noodles”) in Mandarin. Not since Humbert Humbert was chasing Quilty has there been this much wordplay in so few words.

On November 11 (11/11, known as Singles Day, and by 2014 the largest online sales day in any country in the world), Taobao, a service like eBay, but considerably larger, and run by Alibaba, sold almost 1.9 million phones, of which nearly 1.2 million were Xiaomis. That same year, five of every eight Android phones activated in China were Xiaomis. In early 2015, the company launched a “phablet” (the tech industry’s ugly term for a cross between a phone and a tablet) called the Mi Note, priced at 2,300 yuan ($442), cheaper than Samsung’s S5, at over $600. The first day the Note was offered, it sold out in three minutes. Xiaomi raised $41 million in their first round of funding in 2010. As 2014 closed, it was not yet five years old and valued at $45 billion. It is, by several metrics, the most valuable startup ever.

The rise of Xiaomi in half a decade is more than a business story, because mobile phones are special. A mobile phone offers the kind of freedom and connectedness that autocratic countries have historically been terrified of, and China is no exception. The Chinese government has spent the last twenty years building the largest and most pervasive system of surveillance and censorship in the world. Yet China’s fortune and future clearly lie with the opening up it has conducted for the last forty years. This requires the government to allow local entrepreneurs to have connections with the outside world for import and export, and with them, the freedom to experiment.

China sends an increasing number of its citizens abroad, most notably dispatching many of its brightest students away for education in the world’s democracies, and especially the U.S. And yet the current government is clearly convinced that it cannot afford the same kind of openness to new ideas among the general population, so the economic opening up is being accompanied by the sort of broad and deep media crackdown not seen in China since the late 1980s. To give you an idea of the scalpel-like removal of the free play of ideas from public conversation, the government agency in charge of media has banned both time travel and the use of puns in certain kinds of writing, as both forms allow for alternate meanings that might threaten government narratives.

There is no particularly communist approach to handling mobile phones or the internet, mostly because their spread postdates communism as a going concern. Out of two dozen communist countries a generation ago, plus another dozen absorbed as Soviet republics, only five are left. Four share borders in East Asia: China, with Vietnam and Laos to its south and North Korea to its east. (Lonely Cuba, about to be swallowed whole by Club Med, is the extra-Asian holdout.) Copying China, both Laos and Vietnam have long since dropped opposition to public markets and private business. Only North Korea is sticking with the disaster that is collectivized agriculture. (It dismantled communism through nepotism rather than markets.) “Communist” is a merely historical label for how those five governments came to power, providing little predictive utility for current policies or behaviors. All four Asian countries have preserved some of The Communist Manifesto’s dictum to centralize communications in the hands of the state, at least for old media; newspapers, radio, and TV remain heavily controlled. (To this day, parts of Laos get “community radio” via loudspeakers mounted on poles.) However, their collective reaction to the internet varies, to say the least.

North Korea has implemented as close to an outright ban as any country in the world. (Myanmar, its nearest regional competitor on that score, recently started opening up, à la China.) Meanwhile, Vietnam, with a more tourist-driven economy, allows significantly fewer restrictions in areas where Vietnamese and outsiders interact. (The free Wi-Fi in the Ho Chi Minh airport exhorts visitors to “Like us on Facebook!”) China, the Middle Kingdom, is in the middle on this as well, constantly titrating what they allow and deny in order to remain open for business and closed to criticism.

A mobile phone is a kind of lens that makes the importance and contradictions of modern China easier to see. Every year, The Economist calculates the price of a single item—a Big Mac hamburger—across every count...

Table of contents

• Cover
• Title Page
• Copyright
• Contents
• Chapter One: Smartphones
• Chapter Two: Internet
• Chapter Three: Xiaomi
• Chapter Four: Number One Producer, Number One Consumer
• Chapter Five: The Chinese Apple
• Chapter Six: Maker Movement
• Chapter Seven: The Chinese Dream
• Chapter Eight: Copy the Copycat
• Further Readings
• Endnotes