No.1 vendor in mainland, but faces increasing competition from Huawei

Low-price phone maker Xiaomi Inc sold 61.12 million smartphones worldwide in 2014 and became the leading smartphone vendor in the Chinese mainland market, Xiaomi's CEO said Sunday.

The company's smartphone shipments surged by 227 percent in 2014 from a year earlier. Its pre-tax revenue also rose by 135 percent year-on-year to 74.3 billion yuan ($12 billion) last year, Xiaomi's CEO Lei Jun said in a letter posted on his Weibo.

"The year 2014 marked a milestone for Xiaomi, when it turned into an industry leader from an industry follower," Lei said. "Domestic peers have been increasingly researching, studying and imitating Xiaomi's business model."Xiaomi has been competing with domestic rivals such as Huawei Technology Co, whose phone sales have been boosted by its low-priced Honor brand launched in 2013.

Yu Chengdong, CEO of Huawei's Consumer Business Group, said on Thursday that the company shipped more than 75 million smartphones in 2014, an over 40 percent year-on-year growth, making it the world's third-largest smarphone maker and lessening its gap with the top two makers Samsung and Apple.

Huawei's revenue from its Consumer Business Group is expected to surpass $11.8 billion in 2014, representing a growth of about 30 percent from the previous year, Yu said.

"The two companies' figures are not contradictory, as Xiaomi's sales mainly target the domestic market while international market sales contribute a lot to Huawei's business," Xu Hao, an analyst with IT consultancy Analysys International, told the Global Times Sunday.

Both Lei and Yu noted that smartphone makers will face a tough year in 2015.

Lei expected smart device makers would face the fiercest competition this year, given the slower growth in the domestic smartphone industry.

Market intelligence firm IDC estimated that China's smartphone shipments would grow by 7.8 percent year-on-year in 2015, down from 19.9 percent in 2014 and marking the first single digit growth since 2009, it said in a research note sent to the Global Times on December 23.

"Telecom operators' big subsidies on smartphones and the frequent release of new devices have boosted the prosperity of the smartphone industry. However, with the saturation of the smartphone market, the industry growth will mainly come from current smartphone users' replacement needs rather than demand from new users," Yan Zhanmeng, a senior analyst with IDC, wrote in the note.

Lei said Xiaomi will release a flagship product on January 15 without specifying.

Analysts believe this will be its latest smartphone Mi5.

Huawei will also unveil several "competitive" smartphone models targeting the mid- and high-end markets in 2015, according to Yu.

"It is very difficult for Xiaomi to sustain an explosive growth in the coming years, and its No.1 position in the domestic market is likely to be challenged by Huawei and Lenovo, the later of which completed the acquisition of Motorola Mobility in October," Xu said.

Although Xiaomi reported an impressive growth is annual smartphone shipments, its shipment in the fourth quarter dropped slightly from that in the third quarter, signaling weakening growth momentum, said Fu Liang, a Beijing-based independent IT industry analyst.

"Xiaomi is also facing great pressure to maintain its high valuation. It needs to find new growth areas beside smartphones," Fu told the Global Times Sunday.

Xiaomi's latest round of fundraising values the start-up at $45 billion, making it the most highly valued private technology company in the world, according to Lei.

Xiaomi's products have also been sold in six other countries and regions. In India, Xiaomi sold more than 1 million smartphones since it launched sales there in June.

Lei said the company will further expand its overseas markets in 2015.

A lack of patents is the main obstacle for Xiaomi in exploring the international market, Xu noted.

Xiaomi's smartphone sales in India had been suspended for nearly a week in mid-December, triggered by a patent infringement case filed by Swedish telecom equipment manufacturer Ericsson.

Xiaomi had filed around 2,235 patent applications by the end of 2014 since its launch in 2010, Lin Bin, president of Xiaomi, told a forum in late December.

Its domestic rival Huawei had more than 36,500 authorized patents by the end of 2013.