Is Xiaomi’s growth slowing down in India? That is the big question in the mind of most analysts and industry watchers after the release of new report by Counterpoint Research. The market research firm yesterday released its analysis for the second quarter of 2018 where Samsung reclaimed leadership from the Chinese smartphone maker.
Xiaomi dropped to number two in India despite achieving highest ever shipments in the country during the second quarter of 2018. The timing of this could not have been any worse. Xiaomi recently listed itself on Hong Kong’s stock exchange where it is betting on strong growth of India’s smartphone market and demand for its mobile devices in general. Xiaomi’s growth story in India in the past four years is scripted by cheaper price tag and tremendous value for money. However, its competitors have been able to replicate the price and offer same features at even cheaper price.
As Bloomberg rightly observes, Xiaomi not only saw drag in its market share but also in the average selling price of its devices. During the second quarter, over two-thirds of Xiaomi’s shipments were of devices in the sub-Rs 10,000 segment. In comparison, only 42 percent of Samsung’s shipments belonged to that price segment and this shows more customers are buying premium and expensive devices.
Ahead of its IPO, Xiaomi announced that it will limit margins from sales of hardware devices to under 5 percent but sales of cheaper devices should automatically translate to lower margins. Xiaomi’s primary plan to put its devices in the hands of as many users as possible and then make revenue by turning them into an ecosystem and platform products. But the decline sales and lower margin than in the past due to sales of cheaper devices might be raising alarm bells with its investors.
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During the second quarter, OnePlus recorded 284 percent growth in its shipments. This further proves that there is a scope to sell premium smartphones in a country known for dirt cheap smartphones. Xiaomi’s main rival Honor registered a 188 percent growth in shipments while Xiaomi grew by 112 percent. The big question at Xiaomi camp would be can it bounce back next quarter. If it fails to do so and concedes further growth to brands like Oppo, Vivo and Honor then growth of Xiaomi’s market value will be a matter of concern for its top executives.