Xiaomi goes against the grain with new smartphone-controlled rice cooke

(THE WALL STREET JOURNAL) Xiaomi anticipates the jokes about itsever-broadening range ofofferings,whichincludes offbeat items like power strips, Segwaysand now – rice cookers.

But the Chinese startup expects serious sales this year from these products.

Xiaomi hopes that itsecosystem products — which refers to devicesother than smartphones, TVs and Internet routers — will reach 10 billion yuan ($1.5 billion) in sales this year, doubling from more than 5 billion yuan last year, said Liu De, Xiaomi’s vice president of industrial design and ecosystem, in an interview Tuesday.

This would mean sales from Xiaomi’speripheral productsamounted to roughly5 percent ofthe company’stotal revenue last year (the actual amount that Xiaomi collects fromsuchsales would be a smaller percentage due to revenue sharing with its partners). Xiaomi did not disclose its 2015 revenue, although Chairman Lei Jun had said he aimed for overall revenue of 100 billion yuan last year, up from 74.3 billion yuan in 2014.

Xiaomi launched asub-brand on Tuesdayto help separate this sprawling network of household products from its core smartphone business. The sub-brand is called “Mi Ecosystem” in English. Its Chinese name is “Mijia,” which means “Mi Home.”

The first product under the new brand is a high-end smart rice cooker unveiledTuesdaythat comes with a smartphone app for adjusting the consistency of the rice. In typical Xiaomi fashion, the rice cookercomes at only a fraction of the cost of mainstream models– 999 yuan versus several thousand yuan for high-end Japanese versions with comparable specs.

Mr. Liu, a soft-spoken former industrial design professor whobringsa rare academic background to Xiaomi’s team of co-founders, said thatthe companydecided to invest heavily in smart home products in 2013 due to Mr. Lei’s belief that they could get ahead of a big trend.

“One day, all of the equipment we use will be like smartphones and computers, able to connect to the Internet,” he said. “One day, we will be able to use our smartphones to control all our things.”

In response to criticism that Xiaomi has neglected its core smartphone business to build its peripheral product network, Mr. Liu said thatthoseproducts are built by partners, not Xiaomi itself, and that they add to the smartphones’ value.

“We have actually slowed the expansion of our ecosystem twice last year,” he said. “We want it to grow healthily.”

Mr. Liu saidXiaomi’sotherproducts often net better margins thanits handsets due to fierce competition in China’s slowing smartphone market. He said Xiaomi’s founder, Mr. Lei, has sometimes characterized these peripherals as operating on a “gratuity principle.”

“It’s like, our phones are so well-made, so cheap, the margins are so thin,” he said.“Buying a power bank from us is like giving us a tip, in a way.”

Xiaomi has invested in 55 companies that make peripheral products so far, including Zimi, which has sold more than 46.9 million power banks to date, and Huami, whichhassold more than 18.5 million fitness bands. Mr. Liu saidXiaomiwill launch “tens” of new products this year, including updates of existing ones.