Chinese Android phone maker Xiaomi enters a software arms race

Growing Chinese smartphone maker Xiaomi has launched MIUI 6, the sixth edition of its customized Android system.

The major updates include, according to Xiaomi:

(1)  It enables, with Xiaomi Cloud service, cross-platform syncing between Xiaomi devices with MIUI built-in, smartphone, tablet, smart TV, set-top box, and smart WiFi router.

(2)  It has “deeply” integrated security technologies from Tencent, Kingsoft (where Xiaomi CEO Lei Jun serves as the chairman of the board) and LBE (a Chinese Android security solution provider) for security and privacy.

(3) It saves battery life and data usage.

It’s no secret that Xiaomi wants to control content or services for mobile or, more recently, smart home devices.

It’s also well-known that, unlike the custom Android systems developed by many Android phone makers like HTC’s Sense — which are designed simply to put a better user experience on top of Android — MIUI is part of Xiaomi’s business model from day one.

RELATED: What China’s Xiaomi can teach Apple, Google, and the Western tech world

Compared with the one-time gain from hardware sales, the company’s bigger ambition is in the software that will bring in increasingly more revenues in the long run. That’s why the hardware products by the company are sold at relatively low prices.

Besides services such as a browser and app store that were developed in house, MIUI has been integrating third-party Internet services as the default options for local business listings, Wi-Fi hotspots, and package delivery, among others. MIUI has been making revenues from in-house built services through advertising and paid services. It’s only a matter of time before the company takes commissions or transaction fees from third-party services.

So, it’s no wonder the latest updates include cross-platform syncing, security service, and battery and data conservation. It is widely believed in China that productivity services like those, especially when they are free, help build a large user base. And monetizing such a user base is only a matter of time.

Qihoo, with its free online security service and web browser, is a successful case on the PC. A flock of productivity apps have joined the global land grab in mobile Internet market, and some such as Cheetah have already begun monetization.

Xiaomi’s MIUI has done well so far: It has had 70 million installs, the company announced on August 16th, including more than 52 million in Xiaomi phones as of July 2014. By the end of 2013, when its users were about 30 million, MIUI’s monthly revenue reached RMB30 million. In other words, its ARPU (average revenue per user) is one yuan. It’s safe to say MIUI can make at least one yuan per user per month.

Hong Feng, lead of MIUI, said in an earlier interview that the total users would reach 100 million by early 2015. Easy math.

Xiaomi is not alone. With numbers like that, it’s not surprising that a bunch of smartphone brands that emerged this year put more efforts on developing the custom Android system.

OnePlus, a new Android phone brand with a former exec from consumer electronics maker OPPO, has confirmed that it is building a team to develop a customized Android system in Taiwan. Its first flagship phone, OnePlus One, is loaded with CyanogenMod (CM), an open source Android system.

This story originally appeared on TechNode. Copyright 2014