China's Xiaomi's is changing the U.S. too

                                       

Xiaomi is the most important phone manufacturer you've never heard of.

In the rich world, dominated by Apple and Samsung and where even fading brands such as Nokia and Blackberry remain familiar, Xiaomi (pronounced like the "show-" in shower, plus "me") is still largely unknown.

Yet this firm, only 5 years old, has already become a formidable supplier of smartphones in its home market of China (the world's largest), and has begun a remarkably successful campaign of international expansion.

As the firm gets ready to announce its newest model, the Mi5, next week, it is worth tuning in, because more than any company other than Apple, Xiaomi will show us where smartphones -- which is to say the mobile, networked computers we all have in our pockets -- are going worldwide.

China and the United States are the two most important economic powers in the world, and that goes double for technology.

For three decades, that relationship could be summed up as "invented here, produced there." (The iPhone box may say "Designed in California," but it is made in Shenzhen, China.) Xiaomi is one indicator among many that that relationship is over. Its phones are well-designed and cheap, and, more importantly, the firm has been engineered to rely on the Internet, allowing it to build one of the leanest manufacturing and sales operations the world has ever seen.

In a half decade, Xiaomi has gone from a startup focused on making a new mobile phone interface to beating Samsung as the No. 1 phone vendor in the largest market in the world last year.

Xiaomi's products are so popular in China that it has become the third largest ecommerce firm there, just selling its own products. As 2014 closed, the company was valued at $45 billion, an increase in value of something like 18,000% since its first round of fund-raising. It is, by several metrics, the most valuable startup ever.

Xiaomi is widely referred to as the "Chinese Apple," a phrase that carries both a sense of awe at its design prowess and derision at its habits as a design copycat. Both reactions are warranted -- some of their phones look like little else on the market (the Mi3), while others are almost-copies of iPhones (the Mi4).

The firm was founded in Beijing in 2010 by Lei Jun, a computer scientist and charismatic serial entrepreneur now in his mid-40s, who is predictably, often compared to Steve Jobs, both for his energy and brilliance, and for his Jobsian taste in clothes and product launches.