Photo/Zhang Xiaoqing

Nov. 20 (NBD) – Selifie apps and phone maker Meitu (01357.HK) and samrtphone giant Xiaomi (01810.HK) announced strategic cooperation on Monday, according to which Meitu is to authorize the brand, visual technologies and second-level domain of Meitu smartphones exclusively to Xiaomi.

After the deal, Xiaomi will take over the designing, manufacturing, selling, and marketing of Meitu smartphones, while Meitu is to provide support of visual technologies and beautification algorithms. 

Moreover, Xiaomi is licensed to manufacture a series of Meitu-branded smart hardware products, except the skin care-related ones.

The strategic cooperation will enable both parties to utilize what they do best, said Wu Xinhong, founder and CEO of Meitu.

In the future Meitu will focus on developing the next generation of image processing technologies, while Xiaomi's strengths in product design, supply chain management and retail channels will help Meitu smartphones achieve rapid growth and tap wider market, added Wu.

Founded in 2008, Meitu has centered on beauty-related technologies, and has accumulated a considerable and loyal female user base with its Meitu BeautyCam photo app, the Meipai short-form video app, and Meitu smartphones.

The company's smartphones, though a small-scale and niche brand, have brought steady cash flow to the company, contributing over 70 percent of total revenue for the first half of 2018.

However, the company's smartphone sales have seen sharp decrease this year. According to its semi-annual report, Meitu sold only 533, 300 smartphones in the first half of 2018, marking a 37 percent year-on-year shrinkage. Moreover, Meitu decided to delay the launching of a new V series smartphone to the first half of next year, which will further affect sales. 

Moreover, the number of Meitu's monthly active users slided by 15.9 percent to 350 million compared with the figure for late 2017.

To address the plight, Meitu fully pivoted to a "Beauty and Social Media" strategy in August, focusing on a new social platform based on the selfie-editing app Meitu and short video community Meipai to improve user base and net profit, as well as entrenching its strengths in AI and image-related technologies.     

The licensing of hardware businesses to Xiaomi fits Meitu's new asset light business model. As for Xiaomi, the cooperation will help expand its female user base and high-end product line, which are valuable growth opportunities when it has struggled to push further in domestic market.

Besides, with Meitu's leading image-related technologies, Xiaomi can save research and development cost of camera functions as well.

According to Xiaomi's financial report released on Monday, the giant has sold 33.3 million handsets in the third quarter of 2018, marking a 20.4 percent year-on-year growth, and the total smartphone shipment of 2018 has already exceeded 100 million.

The shining results, however, mainly came from overseas market growth, while its Q3 domestic shipment only increased by 1 percent year on year, according to data from Sino Market Research; its domestic market share saw a 16 percent year-over-year decrease, according to data from Counterpoint.

Wang Yanhui, secretary general of Mobile China Alliance, said Meitu has achieved a lot with its camera and social media apps, but as the domestic smartphone heavyweights are catching up in camera functions, it is uncertain how long a minor manufacturer like Meitu can survive. The cooperation with Xiaomi might be a win-win situation for both companies.

Email: limenglin@nbd.com.cn