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Can Xiaomi compete with Samsung and Apple?

January 6, 2015
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Currently valued at $45bn with its business model of producing affordable smartphones, Xiaomi overtook global market leader Samsung in sales last year in the world's largest smartphone market, China. However, it’s widely expected that the growth in the Chinese market will ease this year and Xiaomi has plans to enter the overseas markets in an expansion move to capture the maximum possible audience.

Until now, Xiaomi have successfully entered seven markets outside mainland China. In India, they sold over 1 million smartphones in less than five months, despite the intellectual property challenges it faced in the country last month.

Xiaomi made 74.3bn yuan (£7.8bn; $11.97bn) in pre-tax sales last year, up 135% from 2013. Now the world's third largest smartphone maker behind Samsung and Apple, Xiaomi sold over 61 million phones last year, up 227% from a year earlier. Comparing these numbers with sales of Samsung's smartphones, there was a decline in the third quarter of 2014 (Refer: Samsung Electronics to get back on track), while iPhone sales rose by 26 percent in 2014, according to Gartner data. And this what they had to say on their Twitter account.

Last week, Xiaomi received $1.1bn in funding that valued the firm at $45bn. They surpassed the previously held benchmark of $40bn set by taxi booking application Uber.

Xiaomi also surpassed its target of selling 60 million phones in 2014, 3 times more than last year's number. But in-spite of the huge soaring revenue, some analysts suggest that the investors shouldn't pop champagne corks yet.

The company has come a long way since starting "from scratch" in April 2010. "2014 is a year of important milestones for Xiaomi. We came from behind and became market leader in China," Lei Jun said.

Xiaomi's investors include private equity funds All-Stars Investment, DST Global, Hopu Investment Management, Yunfeng Capital, and Singapore sovereign wealth fund GIC, said co-founder and president Bin Lin in a Facebook post.

And Finally, this is what Donovan Sung, Director of Product Management at Xiaomi Global had to say about what's in store for 2015.

Conclusion: "I don't think Xiaomi can repeat this astounding growth of 135 percent, it's a case of too big, too soon," said Cyrus Daruwala, managing director at IDC Financial Insights. "We're definitely in wait-and-see mode; investors are not looking to raise their profile on Xiaomi yet. The results are too dramatic and can only go downhill from here."

Vital components of the firm's business model remain missing, Daruwala added: "We are unclear as to their research and development (R&D) plans. What is their sourcing strategy in terms of commodities and raw materials? In manufacturing, will they embrace a high-end or low-end focus? We also need more clarity with regards to regional and global expansion plans."

Other analysts are also cautious, questioning the company's sustainability amid its massive hype in the tech world. With a market valuation of $45 billion, Xiaomi has been called tech's most valuable start-up and is currently the third-largest smartphone maker.

So that's what the people around the world had to say about Xiaomi's valuation. Tell us what you think about it? Will Xiaomi be able to sustain and overcome the giants Samsung and Apple?


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