Is Xiaomi running out of steam? by Geoffrey Smith @FortuneMagazine July 2, 2015, 6:04 AM EDT E-mail Tweet Facebook Google Plus Linkedin Share icons The world’s most valuable start-up company might not stay that way for very much longer. Chinese smartphone maker Xiaomi, which was was valued at over $46 billion at its last funding round in December, said Thursday its sales in the first half of the year had fallen well short of forecast, making it almost impossible to reach its target for this year 100 million phones. The company had already lowered its guidance for the year to a range of 80-100 million, but sales in the first six months totalled only 37.5 million, meaning that it will need a big improvement in the second half just to reach the lower end of that target range. Xiaomi has three problems: China, China and China. Firstly, its home market is slowing down in absolute terms as penetration increases: sales fell 4% in the first quarter, according to research firm IDC. Secondly, the company depends too much on its home market for its total sales. Although it has now established in India, it has been slow to open new markets–although it did take a big step earlier this week in opening in Brazil, one of the largest global markets and one which is still growing healthily. Thirdly, it has suffered more than most from Apple Inc.’s AAPL surge in popularity in China. The Cupertino-based giant has rocketed to be the top-selling smartphone brand in China, according to The Gartner Group. Demand for the iPhone 6 drove Apple’s sales in China 73% higher in the first quarter., Gartner says.