Though not a household name in the United States, there’s still a good chance you’ve heard of Xiaomi, a Chinese electronics company that designs and manufactures smartphones, tablets, HDTVs, and an wide assortment of other consumer products.
Since releasing its first smartphone in 2011, Xiaomi’s popularity has increased substantially, in part because the company is generally shameless about copying hardware designs from other companies, and from Apple in particular. Over the past two years or so, there have been no shortage of examples where new Xiaomi products seem to be borderline carbon copies of existing Apple products; the company has even copied Apple event invitations.
That aside, the key aspect to Xiaomi’s success is that the company operates on razor thin margins and offers compelling devices at much cheaper pricepoints than the competition.
And so far, that strategy has been paying off handsomely.
According to the market research firm IHS Technology, Xiaomi’s share of the Chinese smartphone market is already at 18%. Indeed, the emergence of Xiaomi is largely viewed as one of the reasons why Samsung’s smartphone sales have been trending downward in recent years.
“Selling full-featured phones at near cost, it has come to battle Apple and Samsung Electronics Co. for the No. 1 spot in China,” The Wall Street Journal wrote this past June. “It dented Samsung’s China market share badly in 2014, one factor forcing the South Korean company to post a sharp profit drop and to rethink its strategy.”
With that as the backdrop, a recent article in Fast Company posits that Xiaomi is Apple’s biggest threat in China and will soon be the company’s biggest threat everywhere else.
While certainly a compelling headline, the story itself conspicuously lacks any evidence that would bolster such a bold claim. If anything, the story highlights how the peculiarities of Xiaomi’s success in China may be difficult, if not impossible, to emulate elsewhere.
The companies’ global ambitions will increasingly collide, as Xiaomi has begun experimenting in markets outside China. It recently moved to sell accessories like headphones and activity trackers in the U.S. and Europe, though many of the factors that make the company a phenomenon back home—such as Lei’s local celebrity—are moot here in the States.
What’s more, Xiaomi has conveniently avoided smartphone and tablet sales in the U.S. because it’s all but a given that Apple would aggressively take Xiaomi to court for patent infringement.
All that said, the idea that Apple should be threatened by a upstart handset maker with aggressive pricing is nothing new. Ever since the iPhone hit the scene, pundits and critics have been saying that the iPhone’s best days are behind it. And yet, eight years later, the iPhone is more successful than its ever been before.
In the last two quarters alone, Apple sold over 100 million iPhones. During the company’s most recent June quarter, iPhone unit sales and revenue jumped by 35% and 59%, respectively. All the while, iPhone sales in China are exploding.
Fast Company adds:
A more promising battleground for Xiaomi could be India, where it has been wildly promoting the Mi4 and is setting up local manufacturing (to help it bring the price tag of its devices even lower), and where the free-spending types who snap up iPhones are scarcer than in China.
The thing is, Apple isn’t exactly the top dog in India when it comes to smartphone sales. Which is to say, Xiaomi making inroads in India, on the low end of the market no less, won’t realistically do much to Apple’s iPhone sales in the country.
Looking ahead, it’s no secret that Xiaomi has ambitions that extend far beyond mainland China. But that’s not to say that Apple has anything to truly fear from Xiaomi. After all, threat Apple faces from Xiaomi is no different than the threats its seen before from the likes of Samsung, HTC, Palm, Motorola and others.
Xiaomi sells decent products geared towards the low end of the market. Apple’s bread and butter, on the other hand, is selling premium products at premium prices. If history is any indication, Apple’s iPhone won’t experience a fall from grace on account of cheaper handsets flooding the market, whether they come from Xiaomi or anyone else.