26 October 2016
Xiaomi has failed to garner much buzz even after it launched production in India to jump-start its stalling growth. Photo: Bloomberg
Xiaomi has failed to garner much buzz even after it launched production in India to jump-start its stalling growth. Photo: Bloomberg

Xiaomi: From one of China’s hottest firms to yesterday’s news

Signs of fatigue continue to grow in China’s overheated smartphone market, where rampant competition and unending price wars these last two years have led to saturation and a rapid slowdown.

That fatigue is visible in two of the latest headlines, one of which has former superstar Xiaomi failing to garner much buzz as it launches production in India to jump-start its stalling growth.

The other has the struggling Lenovo (00992.HK) launching its own new brand of smartphones, as it also faces lackluster performance for its current lineup sold under its own name and the Motorola brand it acquired last year.

China’s smartphone market is the world’s largest, but also the most competitive due to the presence of many homegrown domestic players.

That reality has forced many mid-sized and smaller names to seek tie-ups with wealthier partners, and forced everyone to look abroad for growth as profits shriveled at home.

Adding to the woes, China’s smartphone market has been contracting this year, with sales falling 4.3 percent in the first quarter after several years of explosive growth.

The market turmoil has put a major damper on both domestic and international brands, with global leader Samsung (005930.KS) stumbling badly as most other domestic names also slip.

The only ones to avoid the chaos have been US leader Apple (AAPL.US), which is experiencing a China boom on its trendy image and unique product design, and also the locally surging Huawei, which is gaining a reputation for its own strong designs.

Then there’s Xiaomi, which has rapidly transitioned from one of China’s hottest companies to yesterday’s news.

The company used to be a regular headline-grabber due to its savvy marketing and hip and trendy image, but more lately has fallen out of the news as its sales slowed and its new product plans were reportedly dogged by technical issues.

The company is making an increasingly rare return to the headlines this week with word that it has formally begun production of its low-end Redmi smartphones in India.

In a sign of how far Xiaomi has fallen, reports of the India production were largely ignored by western media, which had previously flocked to the company when it emerged last year as the world’s third largest smartphone brand.

Xiaomi embarked on a global expansion last year, and India quickly emerged as its largest market outside China.

But then it ran into problems due to a patent dispute, and the company has been working hard to rebuild its business there.

Low-end production

Xiaomi has previously discussed its plans to manufacture in India, and these latest reports say such plans have now formally kicked off with a variation of the company’s low-end Redmi 2, which carries a retail price of 6,999 rupees, or just over US$100.

The phones are being produced by Taiwanese contract manufacturer Foxconn, which also produces for Apple (Nasdaq: AAPL). There’s really not much more to say about this news since it’s been discussed for a while.

But the fact that Xiaomi is having to rely on such small developments to make headlines these days certainly reflects the lack of bigger good news for the company to tell.

The broader picture for the company certainly looks downbeat, with its overall smartphone growth reaching just 31 percent in this year’s second quarter.

That’s a sharp slowdown from the triple-digit growth it was able to record in earlier years since its first products launched in 2011.

Then there’s the equally sputtering Lenovo, whose launch of a new brand called ZUK is receiving a little more media attention though still isn’t generating much buzz.

The first model from Lenovo’s new ZUK line marks a slight upward move from the low-end that has been Lenovo’s traditional territory, with the Z1 model costing 1,799 yuan (US$285).

This new rollout looks like an attempt by Lenovo to follow rivals that are trying to go upscale and build a trendier image by offering products mostly via online channels.

Huawei and ZTE (00763.HK; 000063.CN) have both done something similar with their separate Honor and Nubia brands, respectively.

In all fairness, I should say that these new phones are probably better than Lenovo’s usual low-end models, and this attempt to go upscale is a necessary move for its longer-term survival.

But at this point the market is so overheated and tired out that consumers are hardly likely to notice the new ZUK line, let alone get excited about yet another new brand of smartphone to choose from.

Bottom line: Lack of buzz around Xiaomi’s launch of production in India and Lenovo’s new line of ZUK smartphones reflect fatigue that is rapidly consuming domestic Chinese brands due to rampant competition.

– Contact us at [email protected]


A commentator on China company news and associate professor in the journalism department of Fudan University in Shanghai. Follow him on his blog at

EJI Weekly Newsletter