Xiaomi CEO Lei Jun promotes his company’s smartphones at a product-release event in Beijing. Smartphones account for more than 90% of Xiaomi’s revenue.
Zhang Jin Xinhua—Eyevine/Redux
By Scott Cendrowski
June 24, 2016

At the beginning of 2015, Chinese smartphone maker Xiaomi looked like a juggernaut in the making. The company’s cheap, stylish handsets were selling fast and earning rave reviews. Its executives had launched their plan to compete globally with the likes of Apple, Google and Samsung by rolling out an “ecosystem” of music, apps and Internet-of-Things products. And Xiaomi had just finished a fundraising round that valued the company at $45 billion–making it, at the time, the world’s most valuable privately held “unicorn.”

Less than 18 months later, as Fortune reports in a feature story this week, Xiaomi euphoria has screeched to a halt. A company official recently said the company had generated only $12.5 billion in sales last year, well below the $16 billion that CEO Lei Jun had predicted. Skeptics increasingly doubt that Xiaomi will live up to its hype–and plummeting smartphone sales are a big reason why.

Back at the beginning of 2015, Xiaomi’s Lei announced a smartphone sales goal of 100 million units for the year. The company ultimately shipped only 71 million, according to IDC. Xiaomi isn’t alone in its predicament, because global smartphone sales have stalled. (That phenomenon has hurt Apple, too.) But Xiaomi’s sales have fallen farther and faster than those of many rivals: In the first quarter of 2016, Xiaomi shipped only 10.9 million phones, a 26% year-over-year decline.

Quality problems may be contributing to the steep drop-off. Some Mi phone users have been lamenting publicly about cracked screens and static from earphone slots. And Xiaomi’s newest flagship phone, the Mi 5, has attracted complaints since its release in March, with buyers reporting that new handsets often reached a scorching 120˚ F. Xiaomi says the handset problems involve “isolated cases” and says, “We do investigate all reasonable complaints.” But the phones’ perceived unreliability has had an impact. Clark, the Internet consultant, recently surveyed phone owners in China. Only 37% of Xiaomi owners said they would buy another Xiaomi phone, while 74% of Apple users said they would get another iPhone.

The company’s falling smartphone sales have only drawn more attention to the fact that Xiaomi’s ecosystem hasn’t gotten very far off the ground. Company officials say they think sales of everything from Xiaomi fitness bands to Xiaomi rice cookers could equal their smartphone sales five years from now. But as Fortune explains in “Can Xiaomi Live Up to Its $45 Billion Hype?” that may be even more of a long shot than catching Apple would be.

SPONSORED FINANCIAL CONTENT

You May Like

EDIT POST