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Xiaomi must rethink its smartphone strategy if it wants to remain on the right track

The third quarter numbers of Chinese brand Xiaomi show the effects of ongoing global component shortages on the company’s balance sheet. This puts its smartphone strategy under scrutiny, according to a new study.

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Revenues increased by 0.5 percent year-over-year, but plunged 19% quarter-over-quarter. Quarterly sales growth was the slowest in over a year.

Many have started to question Xiaomi’s business strategy. Counterpoint Research says that Xiaomi is already working on areas of improvement and ways to address external factors.

As mentioned in the company’s quarterly earnings call, Xiaomi was experiencing a SoC shortage globally.

“Xiaomi is primarily supported by 4G-enabled smartphones. Especially those below $300.” Counterpoint senior research analyst Ivan Lam said that 4G SoCs are also the ones with the greatest shortage in smartphones.

With its value-for-money product range that is largely below $300, Xiaomi has seized a large market share worldwide, particularly in the last three years.

Two main reasons are responsible for this. The first is that Xiaomi has taken a large share of the local brands’ sales, as they mainly source their supplies from Chinese ODMs. This leaves them with a lower pricing edge and a lack of core software competency.

“Second: the local OEMs don’t have the marketing power to match Xiaomi. Lam stated that it could be a powerful mass market alternative if the right penetration strategy is used.

However, there are other players who are also playing the “internet brand” game with Xiaomi.

It continued to struggle in offline markets in China, Xiaomi’s country of origin, China. Vivo and OPPO held over 65 percent of the offline market share, while Honor’s strong returns had a significant impact on Xiaomi.

Xiaomi exceeded expectations in Q2 2021 with the huge e-commerce festival “618”. The report stated that Xiaomi’s performance was lower in Q3 2021 because there wasn’t an equivalent festival.

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