Xiaomi Sales Miss Target

On Friday, Xiaomi Corp. said that its smartphone sales for last year had totaled more than 70 million, which meant that it missed its sales target. The company cited the market saturation in China as the reason for its missing the low end of its target for the previous year. Valued at $46 billion, the Beijing-based startup had predicted previously that its smartphone sales for the year 2015 would be somewhere between 80 million and 100 million smartphones, but in the second half of the previous year, the target had gotten immensely challenging as the smartphone market in China slowed down and there was tough domestic competition for Xiaomi.

In a news release, the company stated that they had announced the 70 million sales figure at the annual meeting of the company, which marked a year-over-year rise even though the overall smartphone market in China had declined. It was reported earlier this month that Xiaomi had failed to achieve its 2015 target because of slower-than-expected expansion overseas and also due to its failure to match Huawei in terms of brand image in the Chinese market. Last year, Huawei Technologies Co. managed to surpass Xiaomi in smartphone sales as the former has a stronger brand name in China and has more global sales channels.

Last month, Huawei had announced that its smartphone sales for 2015 were about 100 million. It was the leading smartphone manufacturer in China in the third quarter of the previous year and third-largest in terms of worldwide shipments. The 108 million smartphone shipments for Huawei marked a 44% increase in sales as compared to sales in 2014. The revenue of Huawei’s consumer business division was $20 billion, a 70% increase from 2014. This division consists of tablets, smartphones and wearables. The problem is that all these statistics are coming at the expense of Xiaomi.

Huawei has been paving its way in the Western European market and is driving out premium-priced smartphones in order to ramp up its smartphone shipments. On the other hand, Xiaomi has remained dependent on a limited range of moderately priced smartphones that they sell via online channels and flash sales, which creates pent-up and inefficient consumer demand. The failure to reach target should be a warning sign for Xiaomi because the world’s largest smartphone market i.e. China is only expected to grow by 1.2% this year, which doesn’t boost its chances of making more shipments.

As China’s market is also maturing like others, smartphone penetration is rising, which means that the market is now focused on upgrading rather than buying new phones. As most of Xiaomi customers are first-time smartphones owners that opt for the firm’s device due to their high-end features and low-price, this could be a real problem as fewer people are now investing in new devices and preferring to upgrade. However, it isn’t just doom and gloom for the company’s investors as Xiaomi is carving out a niche in the wearable categories and home devices rather comfortably in order to diversify its revenue stream.