Apple Inc. (NASDAQ:AAPL) battled waning market share in China last year, and one company is certainly taking a bite out of Apple’s share. Some refer to Chinese handset maker Xiaomi as the “Apple of China,” and there are certainly some similarities. But has Apple met its match in the Asian nation?
How Xiaomi is like Apple
Stifel analysts say Xiaomi is currently China’s top domestic smartphone brand and one of the most well-known in the nation. It also has the fastest pace of growth and is the only brand which is building products around smartphones. They say because of the unique business model employed by Xiaomi, they now see it as a “disruptive mobile Internet company.”
Since its inception in January 2012, the long book of the Voss Value Fund, Voss Capital's flagship offering, has substantially outperformed the market. The long/short equity fund has turned every $1 invested into an estimated $13.37. Over the same time frame, every $1 invested in the S&P 500 has become $3.66. Q1 2021 hedge fund Read More
They draw a number of comparisons between Apple Inc. (NASDAQ:AAPL) and Xiaomi, which currently is a private company. The Stifel team notes that, like Apple, Xiaomi designs, manufactures and markets its own smartphones, as well as set top boxes for televisions, smart TVs, routers and other accessories geared toward use with smartphones and the Internet. Also like Apple, Xiaomi actually runs its own operating system. That OS is actually based on Android, but it’s described as a “third-party Android-based optimized MIUI system.”
In addition, Xiaomi’s app store isn’t unlike Apple’s App Store, and the Chinese company also runs a forum for users of its products to meet up, share and learn.
How Xiaomi differs from Apple
Of course there are some differences between Apple Inc. (NASDAQ:AAPL) and Xiaomi. The private Chinese company sells most of its products online through a reservation and invitation system. It’s a unique marketing strategy which involves scheduling sales events at Xiaomi.com and sometimes through SINA , Weibo and WeChat. The company sells limited quantities of its products at each event, and Sterne Agee analysts say usually its products are sold out in just 10 minutes. Its marketing budget is kept to a minimum as most marketing is down through word of mouth, social networking, CCTV and self-produced videos.
Also Xiaomi’s phones are on the opposite end of the pricing spectrum from Apple. While Apple squeezes a pricey premium out of buyers, Xiaomi’s handsets are known for their low prices and also advanced technology. Xiaomi also has the benefit of a major partner—Amazon.com, Inc. (NASDAQ:AMZN). It uses Amazon Web Services to provide cloud services and also speed up user download times. In exchange, the company enjoys “substantially lower related capital expenditures.”
Xiaomi is also at the cutting edge of technology, utilizing logistics systems to manage its inventories. At this point, the company has six warehouses, 18 flagship stores, 436 maintenance shops and more than 3,000 employees all around China.
How Xiaomi could beat Apple in Asia
One of the greatest concerns for Apple Inc. (NASDAQ:AAPL) in terms of doing business in China and other parts of Asia is the price of its products. Of course many consumers are still willing to cough up the cash to buy Apple products, but Xiaomi could pose a threat to Apple if its products become more popular because of their reasonable price tag.
The company entered the Taiwanese and Hong Kong markets a little over the year ago, and last year, it became one of their most popular smartphone brands. Xiaomi apparently has its eye on the North American market next, according to management, who said they will enter the market this year some time.