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Looks Like 'The Apple Of China' Is In Trouble

What goes up must come down
by Tanya Umali | Aug 25, 2016
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With majority of Filipinos hyped up about buying the latest and greatest phones from the Samsungs and Apples of the tech world, other brands have slowly emerged to offer a similar feel to these high-end phones. 

Using the "same effect, lower price" formula, mobile phone manufacturers have made a killing, enjoying skyrocketing sales.

One such company that benefitted from this trend is Xiaomi, or better known as the "Apple of China.”

Unfortunately, the law of averages seemingly has finally caught up with it.

What was once known as China’s biggest smartphone vendor, reports say, is now in deep trouble. Apart from "design theft" accusations from Apple, Xiaomi might be facing the start of its decline.

Lei Jun, the chairman and CEO of Xiaomi Technology talking to the media

After opening in 2010 and enjoying a rapid pace in growth, the smartphone company has reported a 38 percent decline in profit so far this year.

When it first opened, its units were gobbled up by the bargain-hungry market. Its first phone, the Xiaomi Mi1, was released in September 2011. Initially sold for ¥1,999 or P13,944.36, the Mi1 received more than 300,000 pre-orders in the first 34 hours.

Its specifications could be compared with other, more popular brands such as the HTC One S, released in September 2012 (P23,222.29), and the Sony Xperia S, released in February 2012 (P23,505.56). Both the phones contain the same Snapdragon 8260 chipset and 1GB RAM of the Mi1.

By the end of 2014, Xiaomi was already worth more than $46 billion.

It planned to sell 100 million phones in 2015, which experts found quite ambitious for a five-year-old company selling allegedly iPhone knock-offs. But with production costs continuously on the rise, the company suddenly experienced a slowdown, starting with their July 2015 sales. By yearend, Xiaomi just sold an estimated 70 million devices, or 30 million units short of their original goal.

Its current flagship model, the Mi5, boasts of a maximum of 128GB internal storage, 4GB RAM, and 16MP rear camera for the price of only ¥2,499 or roughly P16,471.09. In comparison, the iPhone 6S also boasts a 128GB internal storage but has only 1GB RAM and an 8MP rear camera. The 6S is worth $849 or P39,435.63.

The Mi5 is obviously a better product specs-wise, and is way cheaper—so why the hell are sales plummeting?

According to a Fortune report earlier this year, the 2015 revenues of Xiaomi far from doubled in size. The company’s data showed that their 2015 income was at ¥78 billion or $11.9 billion, which is only five percent higher than 2014’s ¥74.3 billion or $11.3 billion.

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Things are not looking good for Xiaomi in China as well. Figures from the International Data Corporation (IDC), an American market research, analysis, and advisory firm, show that it only sold an estimated 10.5 million smartphones in China in the second quarter of 2016, down from 17.1 million last year, hence the whopping 38.4 percent drop.

The IDC mainly blames Xiaomi’s lack of marketing strategy for the company's recent slide. Unlike its competitors Oppo and Vivo, who spend loads of cash on brand ambassadors to promote their smartphones, Xiaomi doesn’t seem to see the importance of it at all.

"In the past, Xiaomi started the trend of selling its phones online and other vendors soon followed suit and created their own online brand. After vendors witnessed OPPO's success with its R9, they also started riding on the trend of hiring celebrity endorsers to represent their brand and appeal more to the young crowd," says IDC senior market analyst Xiaohan Tay.

"Hiring celebrity endorsers may help increase numbers in the short term, but this alone may not be sufficient to drive numbers in the long run. As there is very little differentiation across products to warrant significant brand loyalty, vendors must constantly think out of the box to get people hyped up about their products."

Right now, Xiaomi still has to reveal its future plans. Let’s wait and see what strategies they will use to catch up.