Xiaomi is proving itself to be the little smartphone maker that could, at least in its home market in China, where the four-year-old company has surpassed Samsung as the biggest-selling producer of smartphones.
A report released by Shanghai-based market research firm Canalys says Xiaomi shipped a total of 15 million smartphones in China for the second quarter, ahead of Samsung's 13.2 million phones shipped and accounting for 14% of the total market share. The numbers represent a massive 240% growth for Xiaomi, which sold only 4.4 million units in the same period last year. And while Xiaomi may not be raking in the most profits yet, its sales are certainly eating into Samsung's, which shipped a total of 15.5 million units in last year's second quarter.
Other Chinese phone makers Lenovo, Yulong share a similar-sized share of the pie with Samsung with 12% market share, while Huawei trails a little bit behind at 11%. The remaining 39% of the market are shared by other phone makers, including LG and Apple.
"The aggressive pricing points for top-notch products is an important reason that led to success," says analyst Jingwen Wang of Canalys. "Both its Mi series products and Redmi series products are price-competitive devices and feature top-notch chipsets, displays and cameras."
Xiaomi's rapid success is fueled by a combination of low prices for high-end smartphones and innovative marketing efforts. The Mi4, its flagship smartphone, flaunts features that can match up to Samsung's Galaxy S5, with a 2.5 GHz quad-core Snapdragon 801 processor, 3GB of RAM and a 13-megapixel camera. The S5, on the other hand, runs on a 2.5GHz quad-core Krait chipset, 2GB of RAM and a 16-megapixel camera. But while Samsung's flagship costs more than $500 in China, Xiaomi sells its top-of-the-line phone for a little more than $100.
To make money, the company focuses its marketing on its e-commerce website, which sells its smartphones in limited numbers to drive up demand, and offers special software that other Android devices do not offer, including Xiaomi's customized Android interface called Miui. Updates to Miui's features are also largely crowdsourced thanks to Xiaomi's feedback loop that allows users to suggest what changes they would like to see in the next version of the operating system. And while other smartphone makers typically take several months to a year to release new interface, Xiaomi releases updates every Friday.
Last year, Xiaomi hired former Google vice president for Android Hugo Barra, whose industry clout has proven key for the Chinese company to forge new partnerships and expand into other markets.
"Particularly in China, we are negatively impacted by the challenging market circumstances, including intensified competition among vendors and weaker demand for 3G phones in anticipation of an extensive 4G LTE rollout," says Samsung vice president Kim Hyu-joon in response to the Canalys report.
