TAIPEI, Taiwan (TheStreet) - Rice isn't as juicy as apples, but it's cheaper and fills you up.
That formula explains why the brand Xiaomi, which means "little rice" in Chinese, is leading Apple (AAPL - Get Report) in smartphone sales in the world's biggest market and just took another bite out of its rival.
Xiaomi, a private Chinese smartphone company known for developing iPhone lookalikes and its whopping $45 billion valuation, just started selling a highly-anticipated new flagship handset that includes a 5.15-inch screen, a speedy Qualcomm (QCOM - Get Report) processor and image stabilization features. The Mi5 officially went on sale in China on Tuesday, and garnered a record 14.4 million user registrations in five days prior to the launch.
The Xiaomi Mi5 also sports an up-to-date Google (GOOG - Get Report) Android system and costs just $306, compared to roughly $804 for an iPhone 6 sold in China. It's got the right price and specs for cost-conscious China, where 438 million smartphones were shipped last year. The handset is expected to bolster Xiaomi's top spot in the Chinese smartphone rankings.
"Xiaomi continues to follow the strategy that has fueled much of its success so far," said Mark Natkin, managing director with market research firm Marbridge Consulting in Beijing. That approach, he said, means "offering a quality phone that incorporates 'good-enough' versions of the most popular technologies currently available in the market at a fraction of the price, and making regular enhancements to the OS for greater ease of use."
But the handset specs alone won't keep it atop the market share rankings forever, analysts say. Those rankings change constantly and technology by Apple, which today sits in third place, is still considered a more reliable and powerful, with iPhones a status symbol for those who can afford one.
Apple led in China from the final quarter of 2014 to the first of 2015, beating the once-dominant Samsung Electronics (SSNLF) . Even in the April-June quarter of last year, iPhone sales doubled in China. Apple CEO Tim Cook forecast in October that China would eventually become the world's biggest market for his company's gear. He made the comment after revenue in China doubled to $12.51 billion in the third quarter.
But consumers are doubling down on frugality as economic growth slows in the country.
"Apple strongly leads China's high-end smart phone market," said Antonio Wang, an analyst with tech research firm IDC. "Apple needs to think about the middle-end market in its next step."
Market research firm Canalys gave Xiaomi a 19% market share at the end of last year, with China-listed brand Huawei Technologies in second place at 15.7%. Apple claimed a 13.7% share, down from 20.4% in 2014.
Apple is a holding in Jim Cramer's Action Alerts PLUS Charitable Trust Portfolio.
Exclusive Look Inside: You see Jim Cramer on TV. Now, see where he invests his money and why Apple is a core holding of his multi-million dollar portfolio.
Want to be alerted before Jim Cramer buys or sells AAPL? Learn more now. Xiaomi, a 6-year-old firm with a following only in Asia and mainly in China, may ultimately cede market share not to Apple, but to another lookalike developer. (To compete outside China, Xiaomi would need to improve its software ecosystem, an IHS Technologies analyst said after the Mi5 announcement.)
Huawei and other China-based developers are vying for the same consumer prototype: highly functional Android phone at low prices. New entrants, such as Oppo and Coolpad regularly splash into the still relatively young market, changing the score. Xiaomi is expected to hold smartphone prices down and use strong marketing, including flash sales, to keep its edge.
Whoever takes on Xiaomi will effectively eat away further at Apple.
"That is what every Chinese phone manufacturer is gunning for -- Apple's margin -- by offering higher and higher end phones at lower and lower prices," said Richard Robinson, the China-based founder of app developer Yolu Co.
This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.
Source: Apple's Big Rival in China Looks to Take Another Bite of Smartphone Sales
No comments:
Post a Comment