IF YOU can sell smartphones, you can sell anything. That seems to be the motto of Xiaomi, a Chinese firm best known for making feature-laden but affordable handsets. On August 31st, at a splashy event in Beijing, it unveiled a robotic vacuum cleaner—the latest in its “ecosystem” of devices, which also includes smartwatches, air purifiers, hoverboards, rice cookers and even an electric screwdriver (most are built by startups in which Xiaomi has a stake).

The snazzy vacuum—it features a futuristic distance sensor that is able to scan its surroundings up to 1,800 times a second—is a symbol of the hubris that has led Xiaomi to chase its ecosystem dreams even as it has neglected its core business. Considered the world’s most valuable startup only a couple of years ago, when it attracted more than $1 billion in funding at a valuation of $46 billion, some now reckon it to be worth only a tenth of that.

The firm vigorously rejects such estimates—and calls another figure deeply flawed. According to IDC, a market-research firm, sales of Xiaomi handsets on the Chinese mainland fell by nearly 40% in the second quarter of...Continue reading