Xiaomi And Shunwei Capital Make $300M Strategic Investment In iQiyi, One Of China’s Largest Online Video Platforms

Xiaomi, which announced earlier this month that it plans to invest $1 billion in online video content, has been very busy spending that money. The hardware maker confirmed today that it and Shunwei Capital have together made a $300 million strategic investment in iQiyi, the video platform that is majority-owned by Baidu, China’s largest search company. Xiaomi said that this is its largest investment to date. Baidu also said that it had increased its investment in iQiyi, though it did not specify the amount.

The investment follows Xiaomi’s strategic partnership earlier this month with Youku-Tudou, the value of which was undisclosed. Youku-Tudou says its monthly user base is now more than 500 million, with daily video views surpassing 800 million.

For Xiaomi, partnering with iQiyi, which like Youku-Tudou is one of China’s largest online video platforms, means that it will have more content to provide as it tries to entice more users into its multi-screen ecosystem of mobile devices and smart televisions. In turn, iQiyi can potentially grow its market share by reaching users of devices made by Xiaomi, which recently rose to become the world’s third-largest producer of smartphones.

In September 2014, 450 million active users spent 2.2 billion hours watching videos on iQiyi’s platform, according to iResearch. Over 60 percent of its traffic comes from mobile devices, an amount that iQiyi hopes to grow by targeting the 85 million users of MIUI, Xiaomi’s Android skin, which is installed on its smartphones and smart TVs.

Like Xiaomi’s deal with Youku-Tudou, its partnership with iQiyi will allow the two to create original content together. In a joint statement, Xiaomi and Baidu said the partnership will “deepen cooperation in developing content and innovative technology products, especially in the mobile Internet field.” In addition to its site, which screens TV series, news broadcasts, and other content, iQiyi also operates iQiyi Motion Pictures and Hauce iQiyi Company to develop original productions.

Xiaomi’s smart TVs, which launched in September 2013, are part of a plan to create a hardware system that syncs between its smartphones, tablets, smart TVs, and smart wi-fi routers. Before it launched its $1 billion investment fund and partnerships with China’s two reigning video sites, however, Xiaomi’s native content for its smart TVs was relatively skimpy. The two deals it announced this month means it no longer has to compete with Youku-Tudou and iQiyi for viewers.

In terms of hardware, however, Xiaomi still has plenty of rivals. For example, Baidu has its own smart TV, called TV+, which already streams content from iQiyi. Alibaba’s smart TV operating system, meanwhile, lets users shop for goods from its massive e-commerce sites and pay bills through their TV sets. Furthermore, Youku-Tudou has also signed strategic partnerships with other major smart TV manufacturers in China, including Huawei Technologies, ZTE 9 Network Technology, Goldweb Technologies; and Jiuzhou Electronic Technology.

According to Digital TV Research, China is now the world’s largest smart TV and OTT (over-the-top) content market, with 20 million to 30 million sets sold each year.