{"id":260715,"date":"2018-07-25T07:33:55","date_gmt":"2018-07-25T05:33:55","guid":{"rendered":"https:\/\/businesstech.co.za\/news\/?p=260715"},"modified":"2018-07-25T07:33:55","modified_gmt":"2018-07-25T05:33:55","slug":"xiaomis-growth-model-is-already-showing-cracks","status":"publish","type":"post","link":"https:\/\/businesstech.co.za\/news\/mobile\/260715\/xiaomis-growth-model-is-already-showing-cracks\/","title":{"rendered":"Xiaomi’s growth model is already showing cracks"},"content":{"rendered":"
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After crowing about how strong it is in India, and how loyal its MiFans are, Xiaomi Corp can\u2019t hold on to top spot in the smartphone maker\u2019s second-largest market.<\/p>\n

Old nemesis\u00a0Samsung Electronics Co pipped it in the June quarter after ceding the lead to the Chinese company two quarters prior, according to data released Tuesday night by Counterpoint Research.<\/p>\n

What should worry\u00a0Xiaomi, and its investors, is that fellow Chinese brands OnePlus and Honor both posted stronger growth during the period.<\/p>\n

Now that Xiaomi is a listed company, these numbers are more than just an academic exercise.<\/p>\n

Dig further into the data\u00a0and you\u2019ll discover something of\u00a0greater concern. Xiaomi\u2019s growth was even more\u00a0dependent on cut-price phones than in the past. Over two-thirds of shipments were in the sub-10,000-rupee ($150) category.<\/p>\n

By comparison, Samsung took first place despite just 42% of the devices it sold being in that price range. In other words, there are\u00a0plenty of consumers willing to pay for more expensive devices.<\/p>\n

Xiaomi likes to pretend that hardware profits don\u2019t matter. And we shouldn\u2019t forget the red herring that founder Lei Jun threw out back in May, when he made a song and dance about limiting net-income margins on devices to 5%.<\/p>\n

\"\"<\/a><\/p>\n

If we\u2019re to believe that, then we need to buy into the view that Xiaomi\u2019s future is in the platform business, where it can sell ads and other services. Underpinning this strategy is getting Xiaomi devices into as many users\u2019\u00a0hands as possible, which is why selling smartphones on the cheap looks like a reasonable trade-off for investors.<\/p>\n

Yet cheap doesn\u2019t buy loyalty. Samsung is proof of this. After all, who\u2019s\u00a0the more loyal\u00a0customer:\u00a0Someone who pays $150 for a smartphone, or someone who pays more than $500? Apple Inc knows the answer.<\/p>\n

That\u00a0OnePlus shipments climbed\u00a0284%, according to Counterpoint, and Honor \u00a0posted a\u00a0188% increase, highlights just how little loyalty Xiaomi has bought with its low-price strategy \u2013\u00a0notwithstanding that its own 112 percent year-on-year growth is impressive.<\/p>\n

If Xiaomi can\u2019t provide\u00a0investors with reasonable hardware margins, and doesn\u2019t garner much loyalty among\u00a0MiFans upon which to build its internet business, then investors need to ask what the company really does offer.<\/p>\n

\"\"<\/a><\/p>\n<\/div>\n

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Read: Xiaomi drops on debut<\/a><\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"

After crowing about how strong it is in India, and how loyal its MiFans are, Xiaomi Corp can\u2019t hold on to top spot in the smartphone maker\u2019s second-largest market.<\/p>\n","protected":false},"author":59,"featured_media":189814,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[34],"tags":[26,7210],"class_list":["post-260715","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-mobile","tag-headline","tag-xiaomi"],"_links":{"self":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/260715","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/users\/59"}],"replies":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/comments?post=260715"}],"version-history":[{"count":1,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/260715\/revisions"}],"predecessor-version":[{"id":260721,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/260715\/revisions\/260721"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media\/189814"}],"wp:attachment":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media?parent=260715"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/categories?post=260715"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/tags?post=260715"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}