Xiaomi's surge to the top of the Chinese smartphone market
didn't take long. Despite only being founded in 2010, Xiaomi sold
more smartphones than
in China last year. Since then, its sales have continued to
increase rapidly, and in the second quarter of this year the
to become China's largest smartphone vendor.
Not only does Xiaomi sell more smartphones than Apple or
Samsung in its home nation, but its customers
are also more engaged
, spending more time in apps than their iPhone- and Galaxy-using
With its penchant for moving fast and offering dirt cheap
hardware, Xiaomi has clearly emerged as a major competitive
threat. After dominating in China, could Xiaomi take over the
Xiaomi's pricing policy
Xiaomi has begun expanding into other markets, notably India, but
has so far largely remained mum on its North American plans.
Xiaomi global expansion chief Hugo Barra, in a discussion with
, indicated the company is planning its U.S. rollout, but gave no
At least for now, it's difficult to imagine Xiaomi finding
For starters, Xiaomi's rapid rise to the top of the Chinese
market appears to have been spurred by the unprecedented value
its handsets offer. Unlike American consumers, Chinese smartphone
buyers don't often have the luxury of subsidies, and those that
are available arerelatively modest and in decline --
, for example, recently announced a plan to reduce the subsidies
it pays to handset manufacturers .
In a subsidy-free environment, it's easy to see why Xiaomi's
handsets would be so attractive. Its latest flagship, the Mi4,
offers a 5-inch, 1080p display, Snapdragon 801 processor,
13-megapixel camera, and LTE connectivity. In other words, it's
comparable to both Samsung's Galaxy S5 and Apple's iPhone 5s, but
at roughly $320, it retails for less than half the cost of its
rivals' latest flagships.
That pricing policy is obviously attractive to Chinese
consumers, but American buyers may be less impressed. Despite
retailing online for just $349, the Nexus 5 has made little
headway against Samsung and Apple's much more expensive handsets.
Buyers in the U.S. seem to have been trained to purchase through
their carrier -- either on a subsidized plan or, increasingly,
a no-interest loan
Xiaomi's unique take on Android
The other issue for Xiaomi would be ecosystem. Although Xiaomi's
phones are technically powered by Android, the Chinese company
uses a heavily modified version of Android -- called MIUI -- that
's services and the Play app store.
For first or second-time smartphone buyers that may not be a
problem, as they have not had time to grow accustomed to a mobile
ecosystem. In an established smartphone market such as the U.S.,
however, that would be a major issue, as buyers who have owned
Apple's iPhone for several generations would struggle with the
prospect of losing their app and media purchases. Even
Samsung and other Android manufacturers would be insulated, as
purchases made through the Play app store would not carry over to
Xiaomi's MIUI-powered handsets.
Xiaomi could adopt a more traditional approach to Android,
releasing a handset in the U.S. with access to Play and other
Android services. However, such a move would undermine Xiaomi's
business model -- the company uses its MIUI services to
monetize its bargain hardware
Contained to the emerging markets
Xiaomi's handsets are clearly attractive to emerging market
consumers, and its rapid rise in China and potential in nations
such as India, Indonesia, and Brazil are certainly a threat
to Apple and Samsung's handset sales in those markets.
But it's difficult to imagine Xiaomi succeeding in the United
States. The factors that have made Xiaomi so successful in China
-- cheap handsets, an Android fork -- would, at least for now,
have little appeal to American buyers.
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After Dominating Apple in China, Can Xiaomi
Conquer the U.S.?
originally appeared on Fool.com.
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