Can Xiaomi Overtake Apple, Samsung?

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Burgeoning Chinese smartphone giant Xiaomi has set its sights on dominating the global smartphone market. The company, which sells high-spec devices at significantly lower prices than competitors such as Apple (NASDAQ:AAPL) and Samsung (PINK:SSNLF), is expanding into new markets including India, the UK and the U.S. [1] [2] Xiaomi has already overtaken Samsung and Apple in terms of market share in China, and ranked sixth globally in 2014. [3] However, we are less optimistic about its global ambitions, at least as they pertain to overtaking Apple and Samsung’s respective market positions. There are several reasons behind this:

  • Apple’s strong ecosystem and brand cachet, particularly in developed markets such as the U.S., should allow it to withstand low-cost competition.
  • Samsung’s phone business appears to be in the midst of a turnaround in the U.S. with the successful launch of its new flagship phone, the Galaxy S6. While we believe Samsung is more vulnerable to competition from Xiaomi, its well-established position should allow it to remain a market leader.
  • Xiaomi’s low-cost model has allowed it to capture market share quickly, but its pricing – estimated to be at or just above cost – may not be sustainable as the company continues to invest in its international expansion.
  • Developed markets such as the U.S. are generally less price-sensitive than emerging markets, as evidenced by the success of the iPhone, which is priced at a premium.

See the links below for more information and analysis:

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Notes:
  1. Xiaomi, China’s New Phone Giant, Takes Aim At World, WSJ, June 2015 []
  2. Xiaomi Begins Selling Accessories (But Not Phones) in U.S., UK, France And Germany, TechCrunch, May 2015 []
  3. Samsung smartphones dominate global market, but margin narrows, CNET, January 2015 []