Xiaomi's $120b rally meets pressure on smartphone sales

Xiaomi’s market value has surged by US$120 billion over the past year, fueled by investor enthusiasm for its EV expansion.

But analysts expect slower growth and lower margins in its core smartphone business when it posts quarterly results later today.

Smartphones still account for more than 40% of total revenue, though this share is declining as EVs grow.

In Q2, Xiaomi’s China smartphone market share rose to 15.7% from 14.7% a year earlier, supported by discounts, according to Counterpoint Research. However, it still ranks behind Huawei, Vivo, and Oppo.

In India, its market share dropped to 8% from 13% by shipment volume. Analysts estimate smartphone revenue grew just 3.9% year-on-year, its slowest pace since 2023.

Despite the EV-driven rally, Xiaomi’s shares have fallen 12% since early July, while short interest climbed to over 0.7% of free float.

🔗 Source: Bloomberg

🧠 Food for thought

1️⃣ Xiaomi’s smartphone struggles follow a familiar cyclical pattern

The current smartphone slowdown isn’t Xiaomi’s first major challenge in this market.

In 2016, Xiaomi experienced a dramatic sales decline from 70 million to 41 million smartphones sold, which pushed it from first to fifth place in China’s smartphone market 1.

That earlier crisis was attributed to supply-chain issues, organizational problems, and over-reliance on online sales, which limited its reach in smaller cities 1.

The company responded by opening offline retail stores and developing an ecosystem of around 100 startups to offer internet-connected products, ultimately recovering with a 91% increase in phone shipments by Q3 2017 1.

The current situation shows similar warning signs, such as heavy price competition, margin pressure, and market share volatility, suggesting Xiaomi may need another strategic pivot to maintain its position.

2️⃣ China’s smartphone market leadership remains highly volatile despite consolidation

The constant shifts in market leadership demonstrate how competitive China’s smartphone landscape has become, even as it consolidates around fewer players.