Oh dear, Xiaomi: '$46bn' winner's phone shipments tumble 38%

Only nine months ago China’s Xiaomi was being touted as “the next Samsung” - a consumer electronics giant with the breadth and ambition to create platforms or "ecosystems". The markets valued Xiaomi at an astronomical $46bn, twice the valuation of BAE. But this year, Xiaomi forgot to do something quite basic: sell enough phones.

Shipments in China fell 38 per cent in Q2 as it fell to fourth spot in the world’s biggest phone market. Huawei and Oppo claim first and second places. Sales actually fell year on year, in a market that grew. Xiaomi units shipped fell from 17.1 million to 10.5 million, while Oppo saw a 124 per cent rise from eight to 18 per cent, and Huawei steady growth to 19.1 million units.

Apple was a loser too. Cupertino's retro 4-inch iPhone SE has caused a sales uptick in the West, but in China volumes fell 31 per cent year on year. The Chinese have come of age with larger phones, and won't relinquish them for a tiddler, IDC notes.

Xiaomi’s extravagant valuation was not entirely irrational – and I’ve made the case here for a Chinese consumer electronics brand coming up by stealth – because of the volume advantages in the home market. The company had branched out to produce an Air Purifier, while Xiaomi’s $13 fitness band seemed to do everything it needed to do, for the fraction of the price of big brand rivals.

But perhaps you don’t need an air purifier in Bucks as much you need one in Beijing. All this diversification might have been a distraction. In a cut-throat market like ‘Droid, phones don’t sell themselves, something IDC analyst Xiaohan Tay points out. Tay cites a few reasons for Xiaomi’s dramatic decline.

It spent heavily on old school advertising, such as billboards. It failed to differentiate its phones on one or two key features, like Huawei with its Leica-branded lenses. And finally, it failed to target the yoof. Huawei, meanwhile, has targeted China’s younger buyers relentlessly with its Honor brand.

As Huawei exec Steve Jiang told an audience last year: "Who are Honor people? They try and wear a flower in their own hair. They are young people.” ®