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Watch out, Samsung: Xiaomi, Micromax, and more budget smartphones will eat 25% of your market share next year

mi 3

Xiaomi’s batch flash sales in India seem to have settled into a repeat routine. Mi 3 stocks have been flying off the shelves in mere seconds each time. Though the Chinese company hasn’t yet divulged exact numbers, it’s likely to have sold about 40,000 units since it launched in India last month.

Right from day one, the disruptive young phone-maker made no secret of its plans to take on Korean giant Samsung on Indian turf. Spec by spec, the power-packed Mi 3 was compared to Samsung’s higher-priced devices, leaving Indian consumers salivating over the value-for-money buy. This is now starting to hurt the smartphone leader – not just in India but globally.

According to Fitch Ratings, the rising competition in emerging markets will eat 25 percent of Samsung’s global smartphone market share by the end of 2015. Lower-priced phones from local competitors are the cause, its latest report says. Samsung won’t be the only global giant bearing the brunt. Thanks to Xiaomi and other new brands, Apple too will see a decline of 14 percent in its market share globally.

The report says:

We expect the big two’s combined smartphone shipment volume to stagnate at around 450 million to 460 million units in 2014 (2013: 467 million), even as the global smartphone market rises by around 20 percent to 1.2 billion. Local handset makers, including China’s Xiaomi, Lenovo, and Huawei, as well as India’s Micromax, are the principal large competitors for Apple and Samsung.

See: 15 new Asian smartphone makers hoping to crush Samsung and Apple

Cheaper challengers

Last year, Samsung led smartphone sales globally with a market share of 31 percent. India was no exception. According to data from an IDC report, Samsung led with a 35 percent market share in the first quarter of 2014. Micromax followed at 15 percent, Karbonn 10 percent, Lava six percent, and Nokia four percent.

And now Xiaomi has entered the battle too. If the initial reception is anything to go by, it has forced market leaders to rethink their value propositions. Samsung launched three smartphones in India, all of which are priced under INR8,000 (US$130), shortly after Xiaomi’s debut. Motorola reacted as well, announcing a US$32 price cut for its best-selling Android phone, the Moto G; it’s the first cut since the model launched five months ago.

In emerging markets, cost is relatively more important than brand value or even cutting-edge technology. But when companies like Xiaomi are aggressively offering top-of-the-line features of phones from Samsung and Apple at half price or less, consumers are more than glad. In the second quarter of 2014, Xiaomi took the lead in China with 15 million smartphones with a market share of 15 percent – ahead of Samsung’s 12 percent, shipping 13.2 million units, the Fitch report noted. Data from Canalys for the same period confirms that Xiaomi is now China’s top smartphone brand, a mere three years after it launched its first ever phone.

“We want to be an Indian in India”

Xiaomi has made it clear how important India is in its scheme of things. At the very outset, it rolled out 36 service centers across the country, as well as an R&D centre to Indianize MIUI, Xiaomi’s Android skin and software ecosystem.

“We realize that Indian consumers make decisions based on service. And we want to do that better than anyone,” Xiaomi vice president Hugo Barra said during the India launch. “We don’t want to be a Chinese company in India. We want to be an Indian in India. And we are putting our best step forward.” So it’s not likely to get any easier for Samsung and Apple.

For consumers, these are happy days – or “achche din” as Prime Minister Narendra Modi reminded people on India’s Independence Day today.

See: Xiaomi wants to thrash Samsung in India with 3 budget smartphones

Editing by Steven Millward

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