Is Xiaomi the new Huawei?

Before the crippling US trade ban, the people at Huawei wanted to lead the fight to Samsung. Huawei ranked second in the world with Apple (and eventually overtook it) and enjoyed a lot of momentum in the few years leading up to the sanctions.

Almost a year after the ban, Huawei even managed to overtake Samsung for the coveted first place in the second quarter of 2020. However, this was due to a combination of unprecedented circumstances. At the time, China was recovering from the COVID-19 pandemic, while Samsung’s strongholds in Europe and North America were just being hit.

Indeed, the latest numbers for the third quarter of 2020 strongly suggest that Huawei took first place because of these circumstances. The Chinese brand has since cut orders in many regions. Huawei’s US-induced foil has also opened the door for many brands to take advantage of the benefits, and it looks like Xiaomi stepped on the plate and picked up where Huawei left off.

The heir to Huawei’s throne?

Xiaomi announced its financial results for the third quarter of 2020 this week, reporting that shipments were up a massive 45% year over year. Counterpoint Research previously reported that Huawei saw shipments declined 24% year over year in the same quarter. It was also found to have a 14% market share versus Xiaomi’s 13% at the time.

In other words, it is likely that Xiaomi has now outperformed Huawei in global market share, becoming the most popular Chinese brand in the process. That 45% number is especially impressive given that, according to Counterpoint, the rest of Samsung’s top five players were down year over year. Even then, Samsung reportedly only delivered 2% growth.

Xiaomi’s strategy over the past few years has been to focus on Huawei’s traditional strongholds in Europe, the Middle East and (to some extent) Africa while maintaining momentum in its home region of China and the highly competitive Indian market. We have already reported that Xiaomi overtook Huawei as number three in Europe in the second quarter of 2020. However, Xiaomi adds that it is in the top 5 in 54 markets and among the top brands in 10 markets (see above).

The US-induced fall of Huawei coincided with the rise of Xiaomi, but it’s not just a coincidence.

The company has long tried to avoid putting all eggs in one basket, and this approach seems to be paying off eventually. Xiaomi reported that for the first time ever, overseas sales represent more than half of sales (just over 55%). This means that the brand can rely on domestic or foreign markets at its own discretion. This strategy has also been used to great effect by Huawei in the past, most recently when it was number one earlier this year.

Xiaomi has also adopted the proven strategy of working with carriers. These major networks have tried to fill the void left by Huawei’s Google-free phones. According to Xiaomi, Xiaomi has teamed up with 50 carriers covering “100 subnets” in 50 countries. This is a sensible move by the brand as networks will no doubt be on the lookout for alternatives to Huawei’s portfolio of lite phones, entry-level Y-series phones, and flagship devices.

The premium puzzle

Xiaomi’s budget phones have always been responsible for growth over the years. Three affordable Xiaomi phones were on the list of the top ten most popular phones in the world in the third quarter of 2020. This was also the case in Canalys’ phone rankings for Q1 2020.

However, the premium segment is a major challenge for Xiaomi. The company has been trying to assert itself in the high-end category for some time. The company’s high-end Mi phones are widely recognized as affordable flagships like the Mi 8 and Mi 9 series.

However, our first hint of a premium approach came last year when CEO Lei Jun suggested that higher flagship prices were in the pipeline.

“I said internally that this may be the last time our price will be below 3,000 yuan (~ $ 447),” the executive was quoted as saying TechNodewith reference to the Mi 9. “In the future our phones could get more expensive – not much, but a little more expensive.”

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Xiaomi’s Mi 10 series was indeed more expensive when it launched in early 2020. This was far from “a bit more expensive,” however, as the Mi 10 and Mi 10 Pro hit the market for 3,999 yuan (~ $ 573 USD) and 4,999 yuan (~ $ 716) in China, respectively. The phones were also priced at € 799 (~ $ 952) and € 999 (~ $ 1,191) in Europe.

Xiaomi has still offered budget flagships in the Mi 10T series, but it will have to upgrade its premium devices with features like water resistance, better screen technology, and more if it is to ask for money from Samsung and Huawei.

The manufacturer also has to grapple with a resurgent Samsung and Apple at this level. The Galaxy S20 FE and the iPhone 12 / iPhone 12 Mini are characterized by a balanced price-performance ratio. These are well-known brands for most consumers, so if in the high-end space, Xiaomi has to perform well if it is to divert the eyes of Samsung and Apple from it.

Still, there was some encouraging news in this segment. Counterpoint previously reported that Xiaomi was among the top 5 premium brands (over $ 400) in the first quarter of 2020. This was a first for the brand since the third quarter of 2018 and was assigned to the Mi Note 10 and Mi 10 families. See the graphic above for a better idea of ​​the leaderboards.

It should be noted, however, that while Xiaomi was fifth in the first quarter of 2020, it only had a 2% market share – that was the degree of consolidation between Apple, Samsung and Huawei in this segment at the time. Huawei’s 12% stake was undoubtedly up for grabs. We wouldn’t be surprised if Xiaomi had already eaten up its share.

What does that mean for 2021?

The COVID-19 pandemic and economic uncertainty linked to Huawei’s troubles definitely created the ideal circumstances for value-minded smartphone brands. It’s just that Xiaomi was in the right place at the right time to take advantage of these conditions. Even so, there is more to being a top gamer than delivering cheap phones. Xiaomi needs to improve its flagship game if it is to compete with Apple and Samsung on this level.

Could Xiaomi consolidate its second place in the charts in 2021? That’s the big question, and a lot depends on what action the Biden administration will take against Huawei over the next year. The return of Google services would be a huge win for Huawei, but there is still a lot of work to be done to regain consumer confidence.

Read: Xiaomi Buying Guide – Everything You Need To Know

In addition to competition from Kingpin Samsung and potential competition from Huawei, Xiaomi will also face a challenge from Oppo, Realme and Vivo in 2021. In fact, all three brands with Vivo in the crucial European region are relatively new to launching earlier this month. In particular, the budget-oriented realme could pose the greatest threat to Xiaomi’s global market share. It has gained a following in Xiaomi’s stronghold, India, and is also aggressively expanding into Europe.

Xiaomi has also increased its R&D investment over the years, finding that it spent 7.5 billion yuan (~ $ 1.14 billion) in 2019, up 29.7% from 2018. The company forecast 10 billion yuan (~ $ 1.5 billion) in 2020. Those numbers are dwarfed by Huawei’s R&D spending – – a massive $ 15 billion in 2019.

Even so, Xiaomi is expected to deliver faster charging, under-display selfie cameras, and UWB wireless technology in 2021. Will new technologies and competitive prices help solidify second place in 2021? Only time can tell.