Wed, Nov 04, 2015 page14

• Chinese start-up aims to topple Fitbit in wearables

  SAME, BUT CHEAPER: Huami’s fitness wristband sold 3.1 million units in the second quarter, and has been ranked as the third-best-selling wearable in the world

  • Bloomberg
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  Huang Wang (黃汪) is not lacking for ambition: The chief executive officer of China’s Huami Inc (華米) is preparing to challenge Fitbit Inc’s global dominance with a string of new wearable fitness devices.

  The feisty startup and Fitbit’s biggest Chinese rival plans to introduce the line of more sophisticated fitness trackers over the coming year — at one-tenth the price of the US company’s gadgets.

  “Over the next year, our entire product line will be about the same as Fitbit’s. Whatever they have, we will have,” Huang said in an interview.

  The Chinese company’s main product, a fitness wristband called Mi Band, sold 3.1 million units in the second quarter, and was ranked the third-best selling wearable worldwide after Fitbit gadgets and the Apple Watch, according to market research firm International Data Corp (IDC).

  Huami plans to eventually take its new gadgets to Europe and the US, Huang said, without disclosing a timeline.

  The firm was founded last year with an investment from Chinese phone maker Xiaomi Corp (小米), becoming its partner for wearable technology.

  Mi Band, which is marketed under the Xiaomi brand, is still mainly sold in China.

  Huami’s new lines will have the same functions and features as Fitbit devices, said Huang in a spartan meeting room in the company’s office on the northern outskirts of Beijing.

  The 40-year-old executive majored in microelectronics at the University of Science and Technology of China, worked for about a year as a software engineer at Huawei Technologies Co (華為), and built three tech start-ups between 1998 and 2013 before joining hands with Xiaomi to found Huami.

  “Within two or three years they could easily come up with smart watches or other types of smart bands that could challenge any of the players out there,” IDC senior research manager Kenneth Liew said of Huami.

  Even so, the Chinese company is planning its expansion at a time when competition is mounting in the global wearable-device market. While sales of lower-end lines are likely to increase in emerging countries, the majority of early users are graduating to smartwatches made by vendors like Apple Inc and Samsung Electronics Co that can track health data and run other applications from third-party developers, Liew said.

  Fitbit is also making inroads into China. It has a Chinese-language Web site, and customers in China can make their purchases through e-commerce platforms such as Amazon.com and JD.com (京東).

  The Chinese device maker is considering a third round of fundraising, but that is not an urgent need as the company had more than 10 million yuan (US$1.6 million) in net profit each quarter this year, Huang said.

  In December last year, after receiving US$35 million in a second round of financing from investors, including Sequoia Capital, the company said it was valued at US$300 million.

  A third round “will definitely raise over $100 million,” Huang said.

  Huami is not formally planning an initial public offering yet, but will look into listing overseas, probably on the NASDAQ, within three to five years, he said.

  Huami’s Mi Band mainly tracks a user’s sleep status and steps, and the results are shown on a connected smartphone.

  Fitbit’s devices are able to collect more sophisticated data like the user’s heart rate and many of them have display screens.

  Huang declined to give details on gadgets in the pipeline, saying only that they would match Fitbit products and advance toward tracking vital signs like heart rate and blood pressure.

  Mi Band, launched in August, is sold for 69 yuan (US$10.85) in China.

  It costs about 90 percent less than a similar Fitbit product without a screen, Huang said, adding that the prices of Huami’s more advanced products will be as competitive.

  Huang says he sees Fitbit as his main competition globally, as both companies focus on relatively simple fitness trackers, as compared to Apple’s multi-function smart watches.

  Huami has not decided whether to market the new lines under Xiaomi’s brand, Huang said, adding that it would depend on the strategy that promises the best benefits.

  Seeking fresh growth, Fitbit is seeking to make inroads with corporate clients interested in promoting employee fitness and lower health-care costs. Tapping the US corporate segment of the market is likely to be challenging for Asian companies, and will give Fitbit some protection from low-cost competition, Huang said.

  “For cheaper Chinese wearables targeting mature markets the margins might be squeezed even more as service level costs are typically higher coupled with increased marketing costs,” said Jitendra Waral, senior analyst for Consumer Electronics & Manufacturing at Bloomberg Intelligence.

  Pushing prices down would mean that Huami would not be able to count on large profit margins from hardware sales.

  It plans to make up for that by analyzing user data and connecting people to outside service providers, Huang said, adding that an insomniac might get a recommendation for a sleep therapist.
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