Starting in September, Chinese phone maker Xiaomi expects to begin shipping Android devices pre-loaded for the first time with Microsoft software such as Word, Excel, PowerPoint, Outlook and Skype. The companies announced the plans yesterday as part of an expanded partnership under which Microsoft will transfer some 1,500 of its patents to Xiaomi.
Founded just six years ago, Xiaomi has grown quickly to become one of the world’s largest smartphone companies. However, the firm was recently pushed out of its fifth-place position on the global market as China-based competitors with lower-cost products have expanded their reach.
Microsoft and Xiaomi have previously teamed up to bring the Windows 10 operating system to Xiaomi’s Mi Pad tablets. The Chinese company’s Mi Cloud service also runs on Microsoft’s Azure cloud platform.
‘Great Move for Both’
“I think it’s a great move for both and here’s why — Xiaomi needs patents for international expansion outside of China and this is a great buy,” Ryan Reith, vice president for IDC’s Worldwide Mobile Device Trackers program, told us. “It likely won’t solve all of their problems but they have quietly been buying up patents for quite some time now so I’m guessing they are getting well positioned.”
For Microsoft, it’s about getting its services on more devices out of the box and the company believes Xiaomi has the potential to grow, Reith said. “Office on Xiaomi phones is a win for each of them,” he added.
Microsoft did not provide a dollar value for the cross-licensing and patent transfer deal with Xiaomi. However, the Wall Street Journal noted in a report yesterday that the company has been trying for years to collect royalties from makers of Android devices that use its technology. The Journal added that Microsoft CEO Satya Nadella is currently visiting China and other Asian countries.
Growing Pressure from Chinese Competitors
The partnership will enable Xiaomi to provide productivity, collaboration and communication tools to “tens of millions of consumers and business customers in China, India and around the world,” Microsoft said in a statement yesterday. Beginning in September, Microsoft’s software will come pre-installed on Xiaomi’s Mi 5, Mi Max, Mi 4s, Redmi Note 3 (pictured above) and Redmi 3.
The expanded Microsoft partnership could help Xiaomi expand its reach beyond China, offering it stronger patent protections for selling in Western markets, Reuters reported yesterday. Xiaomi has yet to offer its smartphones in the U.S., although it released a set-top box for television viewing in the U.S. last month.
In its most recent Worldwide Quarterly Mobile Phone Tracker, released in late April, IDC reported that Lenovo and Xiaomi had been pushed out of their previous fourth- and fifth-place positions on the global smartphone market by two up-and-coming Chinese firms, Oppo and Vivo.
As China’s smartphone buyers become increasingly sophisticated, companies like Xiaomi will have to find ways to expand into more mature, international markets to remain competitive, according to IDC.
Microsoft, meanwhile, has its own challenges in China. Following the adoption of new antitrust laws in that country, state regulators have been investigating Microsoft since 2014 in connection with its bundling of software and other issues. Nadella has met with Chinese regulators in the past, but the company did not say whether any such meetings are planned during his current visit.
