Huawei might be suffering in today’s political climate, but every action gets a positive and negative reaction and could Xiaomi be benefitting from its rival’s misery?
The Chinese challenger brand might have missed on market expectations for revenue, but it is not the worst set of financial results you have ever seen. Looking at the most simplistic measure of a company, it made more money than last year, brought in more profits and sold more products; not too bad.
“Thanks to the Xiaomi relentless efforts, we have managed to achieve solid growth in our businesses, posting a consensus-beating profit and becoming the youngest Fortune Global 500 company in 2019, despite global economic challenges,” said Xiaomi CEO Lei Jun.
“Our performance is testament to the success of our ‘Smartphone + AIoT’ dual-engine strategy and the Xiaomi business model. Looking ahead, we will continue to strengthen our R&D capabilities and investments so as to capture the great opportunities brought by 5G and AIoT markets and strive towards ongoing achievements for the company.”
Financial analysts will be pouring over the spreadsheets to understand why Xiaomi seemingly missed market expectations, but let’s not forget, the smartphone market is in a notable slump right now. Sales are slowing and the 5G euphoria is yet to hit home to compensate. No-one is immune from overarching global trends.
However, there is a glimmer of hope on the horizon for the majority of smartphone manufacturers; there are gains to be made from the Huawei misery.
According to the latest smartphone shipment numbers from Canalys, Huawei’s smartphone shipments in Europe have declined year-on-year by 16%, while Samsung and Xiaomi have grown their numbers by 20% and 48% respectively. Other factors will contribute to the increase, though there will be former-Huawei customers who are seeking alternatives brands at the end of their replacement cycle.
Huawei is in a bit of a sticky situation right now. Firstly, its credibility has been called into question, thanks to President Trump’s trade war, while its supply chain is suffering due to the tariffs from the aforementioned trade war. The supply of critical components is under threat, as are security updates from Google’s Android operating system. Both of these concerns will impact consumer buying decisions.
Looking at Huawei’s financial figures, the consumer business unit is still on the rise, revenues were up 23%, though when you take into consideration the analyst estimates, it would seem these gains are from the domestic market. If Xiaomi can avoid collateral damage, it could benefit from Huawei’s alleged downturn in the international markets.
This does seem to be the case. For the first half of 2019, Xiaomi’s revenues increased 20.2% year-on-year to roughly $13.55 billion. The international markets, an area of significant potential for Xiaomi, accounted for 42.1% of the total, compared to a 36.3% proportion in the same period of 2018.
The gains in Europe have been highlighted above, though the Indian market is looking like a very profitable one. IDC estimates suggest Xiaomi is still leading smartphone shipments in India and has done for the last eight consecutive quarters. Estimates from eMarketer state smartphone penetration will grow to 29% of the Indian population in 2019, year-on-year growth of 12.5%. There is still a massive amount of growth potential in this market which is undergoing its own digital revolution.
Another area which has been highlighted for gains by the Xiaomi management team is the increasing diversity of the product portfolio.
Aside from the Mi 9 series and Redmi Note 7 series, the team launched the new K20 flagship during the second quarter, with shipments exceeding one million in the first month. The CC Series has also seemingly gained traction with female audiences, while the Mi MIX 3 5G was one of the first 5G compatible devices to hit the market. Numerous telcos have partnered with Xiaomi for this device, suggested the team is taking the shotgun approach as opposed to signing exclusive partnerships.
What is clear, Xiaomi is a smartphone manufacturer which is heading in the right direction. However, the gains could be increased should the misery continue for Huawei.