Xiaomi acquires 3% of Chinese games and software giant Kingsoft for $68M

Xiaomi, the world’s third largest smartphone distributor, has acquired 2.98% of Kingsoft, a games and software company, for HK$527 million (~US$68 million). The Xiaomi investment in Kingsoft is expected to be completed at the end of January. The company bought its shares from internet giant Tencent, which reduced its stake in Kingsoft to 9.6%.

Xiaomi has been on a fierce trajectory since it broke onto the technology scene in 2010. It has taken its dominance of the smartphone scene in China and expanded effectively into other markets. Xiaomi became the world’s third largest smartphone company based on sales last year. Indeed, it may well be the primary cause of Samsung’s dismal performance in the Asian market. Xiaomi is already being touted as the major competition to Apple.

In 2014 alone, Xiaomi sold more than 60-million devices, overtaking Samsung as China’s top smartphone company and become the third biggest seller of smartphones worldwide in Q3 2014.

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Kingsoft started out developing PC games, and moved on to produce security, entertainment and enterprise products, and is currently valued at US$2-billion. The company is however no stranger to Xiaomi. Lei Jun, Xiaomi co-founder and CEO, is chairman of Kingsoft and owns 15% of the company. The deal is set to increase Lei’s voting rights in Kingsoft to 29.9%.

The investment is important to take note of as it show Xiaomi’s intention to be a major player in software and services. Xiaomi appears with the acquisition to be making a gesture towards creating a dedicated games service, including security features and other mobile services for its customers.

This move also diversifies Xiaomi’s services, adding to its air purifier, blood testing device, smart TV and streaming box.