Hugo Barra Xiaomi -11

Former Googler Hugo Barra has been leading Xiaomi’s international expansion in 2014

Despite what many may look at as a sign of corporate demise, the ascending and descending yo-yo effect of corporations that once dominated/underwhelmed in their sectors is often necessary in order to push innovation and re-energize creativity. Two of the smartphone industries biggest behemoths are currently finding this lesson out the hard way, with the latest sales numbers reflecting a recent decline in their dominance, while newcomer Xiaomi has now made its official debut as a top 5 smartphone vendor.

The numbers at a glance

According to Gartner, a total of 301 million smartphones were sold in the third quarter 2014, which reflects a 20% increase from Q3 of 2013. While this obviously reflects that there indeed is growth within the sector itself (66% of all phones globally used are now smartphones), Apple and Samsung’s share of those sales (37%) witnessed a combined 7% drop, mostly at Samsung’s expense:

Gartner Q3 2014

While these two companies are always the first to be analyzed due to their dominance of this sector in the past years, even the smallest decline can often make investors cringe. Nevertheless, it’s worth noting that Apple is expected to have very strong Q4 sales, as demand for the bigger iPhone 6 Plus is by no means lacking.

Samsung, who’s woes have been a subject in the tech world for quite some time now, is still maintaining its lead in the market (24.4%), which is far from Apple’s 12.7% share, but more than 7 percentage points less than what they sold the previous year in the same quarter.

So what is the determining factor in these numbers that is causing such a shift? In a word: China.

The impact of China and emerging markets

As displayed in the chart above, 3 of the top 5 leading smartphone makers are now Chinese companies. Samsung lost a whopping 28.6% share in China, which reflects how consumers are shifting their buying habits toward devices made in China with good specs and significantly lower costs.

Xiaomi is clearly the new kid on the block here, as the company has now made its debut as one of the top 5 vendors in the world within the smartphone market. Their numbers skyrocketed a jaw dropping 336% in Q3 to capture 5.2% of the market (16 million sales in total, which is way up from the 3.6 million sales last year), while Huawei and Lenovo also made their claim due to higher demand in China.

Considering the comments that Samsung recently made about Xiaomi, it is very clear that they mean business when it comes to making their mark on the smartphone world, regardless of who they need to go through to get there.

Android growth continues

Android as a total gained 1.1 percentage points to arrive at 83.1% market share for Q3, while iOS came in at 12.7%, and Windows at 3%:

Gartner Q3 2014 2

Making adjustments

With 3 of the worlds top 5 vendors now coming out of China, analyzing why their strategy (especially Xiaomi’s) is having such success is something that all companies would be foolish not to do. Not only are they selling devices with solid hardware at prices significantly lower than bigger companies like Samsung and Apple, but their approach to tackling developing markets that typically don’t pay $600 for a phone has in essence made them somewhat of a household name in a very short period of time.

The days of devices being sold for the same or close to the same price in an emerging market as their Western counterparts appears to be on the decline, as consumers now realize that they can own quality hardware for a fraction of the price.

xiaomi mi4 first impressions aa (1 of 13)

The Mi4 is Xiaomi’s latest flagship

Final thoughts

When taking into account that Apple’s “new” devices are bound to have a huge fourth quarter, how Chinese companies are growing at a mind blowing pace, and how companies like LG are now starting to get their act together, the real struggle will seemingly lie with Samsung. The good news is that there is now no longer room for “laziness” within the smartphone world, as minor updates and tweaks are no longer enough for consumers to open their wallets.

Samsung still holds the lead, they still sell the most, and they can still turn things around should they choose to take some of their strategy back to the drawing board. Whether or not they will do that, however, is yet to be seen.

That being said, Xiaomi also has its share of problems and accusations that it will need to confront. Should Xiaomi continue to rise, it will realize that success in this industry does indeed come with a price and a level of corporate responsibility that no amount of sales or popularity can prepare them for.

What do you think of the current state of OEM vendors, and how do you see things turning out?

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