Let’s all pause for a second and think about China. From the 1990s to present day, China has taken the international market by storm. Providing products for all levels of consumers, it seems like nothing will stop this country from taking over the world.
Regardless of the misplaced hate for Chinese products, one can only watch when a massive company tries to penetrate an international market and fails. And the perfect example for this is LeEco.
Everybody knows about Xiaomi, the household Chinese brand. LeEco, formerly LeTV was established six years before Xiaomi, way back in 2004. Although the popularity of Netflix is rising, LeTV was one of the first players in the video streaming market. The owner, Jia Yueting, earned big bucks from this untapped market within China. Buying off Coolpad Group 2015, he implemented technologies from his newly bought company and merged it with his own brand, LeTV. Hence, on 2016, he released the Le 1S & the Le Max.
It was a hit. Not as big of a hit as the OnePlus or the competing Xiaomi mobile phones, but these global hits came right right from the bowels of Shenzhen, where LeTV phones came from;
First mistake: Overestimation of time
Regardless of what the phone offered in build quality and performance, they failed to utilize the time period in which phones featuring Snapdragon processors lacked proper heat dissipation technologies, namely the infamous Snapdragon 810 phones. In this period, Xiaomi rose to the top with their signature flagship phones and they directly skipped implementing this processor in their phones, opting to use the hexacore Snapdragon 808 in their then-flagship phone, the Mi 4S.
LeTV, being a completely new player, took this market by storm but took way too long to do it. Featuring a wonky timeline with no vision, they released affordable flagships at low prices, but with the processor of Mediatek, known for GPS issues and low performance.
Second mistake: aggressive expansion, unknown brand name
For any entrepreneur, starting out in a market is quite easy. You try to sell your product and it slowly builds momentum. But in a saturated market, expansion is quite hard. Just a year after releasing its first phone, LeEco directly expanded into the US market. The US market already had cheap phones pouring in from the likes of Blu and had seen a massive import of Xiaomi phones.
But nobody knew of LeEco.
Up until 2016, LeEco was known as LeTV. LeTV was marketed under a single brand name for its media streaming services and electronics. Their reputed connections with Chinese consumers went a long way and skyrocketed their businesses. But an abrupt decision to change their name tried to push forward a design nobody was ready to acknowledge yet.
Among all these decisions taken within a year, they announced their plans to acquire Vizio in a two billion dollar deal in July 2016. Vizio was to be operated as an independent subsidiary in California, while Vizio’s Inscape was going to be spun out as a privately held company. The deal was later cancelled and LeEco’s reputation in the market was tarnished.
Third mistake: steady cash injection into failed projects
On October 2016, LeEco had a big event in which it announced its plans to expand into the USA. The event was ambitious to say the least, announcing smartphones, 4K TVs, Set Top Boxes, VR Goggles, smart goggles, and a freaking self-driving concept car from another startup company from the owner of LeEco.
Where was the money coming from? The streaming services, of course. But how much can one afford?
A few days later, the company’s CEO sent out an internal memo saying how the company overextended in its global strategy but the company’s capital and resources were limited. Good job Captain Obvious. You bought land from Yahoo in Silicon Valley for 250 million dollars while being strapped on a mountain of debt to suppliers and business partners.
Following of a flurry of mistakes and terrible decisions, LeEco announced that its offices will be home to 12,000 employees in an “EcoPark”. Today, the office is a ghost town with less than 500 people working in the office regularly, as result of serious layoffs and wonky relationships with investors.
Back in China, the CEO tried to secure investments for a while, but were avoided by big investors in the country. A few days ago, the CEO was blacklisted as a debtor in China’s debtor database, being recalled to China for paying debts of a hundred million dollars.
Fourth mistake: management issues
Whereas companies like Xiaomi started out with a strong management and a CEO with proper experience of handling startups properly, LeEco’s initial management started out quite wonky. While Xiaomi’s initial investors consisted of Google’s employees and some from Snapdragon LeEco only managed to poach Google’s lead legal counsel, who stayed on for less than a year.
Overambitious planning without any streamlined operations made LeEco’s resources go down the drain.
On the other hand, Jia Yueting’s very own pet project to take on Tesla – Faraday Future – saw its California based factory deserted, with no development occurring whatsoever.
Aftermath : making amends
Remember when we mentioned LeEco buying off Coolpad Group in 2015?
A few days ago, LeEco liquidated half of its share on Coolpad. Right after Coolpad’s liquidation comes 2.2 billion dollars of cash injection into LeEco from Sunac China Holdings. The investment will see 160 million dollars in LeEco’s cinema division, 918 million dollars in LeEco’s ICT sector and 1.2 billion dollars in LeEco’s smart internet TV division.
And the results are already in. A few days ago, LeEco released ten new smart TV models in China. It seems that Jin Yueling finally has a proper vision of expansion through which they can find sustainable development in the markets it has already expanded into.
The future still looks bleak for Jin Yueling as Faraday Future’s California factory is deserted and all outlooks for its ambitious electric vehicle seems scrapped, but we can surely hope that LeEco can regain its former glory and spice up the niche market of Chinese electronics in the future.