Why did LeEco get everyone talking at CES?

Timmy Shen

Are you familiar with LeEco? The French-sounding name might be confusing for some, but the Chinese tech giant has set its foot in the US, launching its ambitious expansion there last year. As CES 2017 concluded last week, LeEco had been trying to make its name familiar to American consumers with an array of products, from smart bikes to TVs.

The year of 2016 had actually been a hectic and difficult year for LeEco, while it tried to expand globally. Despite its big splash on American soil last year with its USD 2 billion purchase of TV manufacturer Vizio, American analysts remained skeptical about LeEco’s US expansion.

LeEco, also known as the “Netflix of China,” won big in China with what it describes as an “ecosystem” where they brought together hardware, software and content streaming services. The company grew rapidly in China over the last couple of years, from an online video streaming site to an aspiring smart car pioneer.

The Chinese tech giant announced its ambitious expansion plan to the US last year but soon saw a shortfall in its financials. In November 2016, LeEco’s founder and CEO Jia Yueting (known as YT Jia) sent a letter to his employees saying that he would cut his annual salary to 15 cents (one yuan) after he acknowledged that the business was running low on cash.

“No company has had such an experience of being caught in ice and fire,” Jia wrote in the letter, according to Bloomberg. “We blindly sped ahead, overextended in our global strategy and spent recklessly on expanding our business scale, when our capital and resources were in fact limited.”

Despite this financial hole, LeEco seems to have no plan to halt its American expansion. LeEco’s general manager of product marketing, Kenny Mathers, told the press at CES 2017 that the company’s US expansion plans are not changing, and that the company went from having a 2,000 person workforce to growing to more than 10,000 people globally.

According to Mathers, the company’s focus for the first half of 2017 is amplifying distribution and scale. LeEco’s products have been available in Best Buy, Target and Amazon since last December.

As a company which first started out with video content, and has put content strategy on top of its list, LeEco is also looking to partner with some high-profile companies, such as MGM and Lionsgate, for content extension.

Jan Dawson, the chief analyst at Jackdraw Research in the US, suggested in an email response that we should keep closely watching LeEco’s content deals, which the company didn’t flesh out at its US coming-out party last year.

“The lack of compelling content and broad mainstream content distribution were two shortcomings in the original launch event,” said Dawson. “The retail side is slowly being fixed with Best Buy and Target distribution, while the content side is still lacking.”

LeEco’s investment in America has not been restricted to its own slews of products. American automobile company Faraday Future, which has been backed by Jia, unveiled its latest high-tech electric car FF 91 SUV in a recent showcase in Las Vegas. The automaker announced that it had secured more than 64,000 pre-orders of the FF 91.

FaradayLeEco
Faraday Future

LeEco has also caught analysts’ attention on its loan to finance a $250 million purchase for its North American headquarters in Santa Clara. LeEco bought a plot from Yahoo that can eventually host thousands of workers.

However, the real estate deal could potentially risk the health of Faraday Future, given that it acted as the guarantor of the loan to LeEco. According to San Francisco Chronicle, LeEco plans to build its Santa Clara property to an “EcoCity” for US workers as a part of its US expansion plan.

While LeEco is rolling out its devices and products to the US market all at once, analysts will watch closely the next moves of LeEco and Faraday.

“I’d watch for further content deals [of LeEco], which I understand will be announced shortly, and more retail distribution,” said Dawson.

(Top photo from Baidu Images)