Xiaomi reinvests in artificial intelligence-powered device ecosystem

Chinese technology company Xiaomi announced plans to invest more than 50 billion yuan ($7.2 billion) over a five-year period in an “All in AIoT” strategy, according to Reuters.

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This ups the original $1.5-billion, five-year investment plan announced in January 2019, which focused on expanding in-house and third-party products compatible with the Xiaomi digital assistant, Xiao AI. Xiaomi also hoped to develop the capabilities of its AI such that it could better serve as the intelligent focal point of the growing ecosystem of compatible devices.

By investing in this space, Xiaomi hopes to supplement and shift away from its declining core business of smartphones. Since introducing a bevy of Xiao AI-enabled products — including TVs, refrigerators, washing machines, wearables, and even rice cookers — Xiaomi managed to offset the decline in its core smartphone segment with a 44% year-over-year (YoY) growth in the IoT and lifestyle products segment, according to the earnings report for the quarter ending September 30, 2019.

Smartphones still made up more than 60% of Xiaomi’s revenues, though that’s nearly a 10% decline compared with the year prior. And smartphones are still integral to Xiaomi’s plan to make Xiao AI ubiquitous, as the assistant comes preloaded on smartphones sold in China. Xiaomi saw a 69% YoY increase in monthly active users of the digital assistant.

Xiaomi hopes to embed its AI throughout the consumer technology ecosystem, thereby establishing a lasting presence at the heart of the user experience. As evidenced by Microsoft’s dominance in the PC era, and Google and Apple’s success in the smartphone era, companies that control operating systems maintain a significant competitive advantage.

This is why big tech companies have battled so fiercely to place their digital assistants at the center of connected device ecosystems. Big tech companies — Amazon and Google in the US, and Baidu and Xiaomi in China — are looking to establish momentum as they enter the age of ambient computing, since the AI algorithms underpinning digital assistants depend upon collecting user data to improve. Furthermore, early momentum can sway hardware partners to utilize one digital assistant platform over another, which is important for establishing greater access to users — for instance, in their vehicles

Xiaomi should leverage its core smartphone business to gain voice assistant market share. Though the $7.2 billion dollar investment is intended to diversify Xiaomi’s focus away from its core smartphone business, smartphones could end up being key to the future success of its digital assistant strategy.

Xiaomi can make Xiao AI the default on its devices, presenting an advantage over competitors, much in the same way Google defaults to Google Assistant on its devices. This foothold could help Xiaomi remain a formidable presence in China’s AI-connected devices market, which is expected to reach 5.8 billion devices by 2023, according to Canalys forecasts. 

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