Xiaomi’s expansion to Africa comes with concessions

November 3, 2015, 12:22 PM UTC
UNICORN 2015 — Lei Jun Xiaomi
Lei Jun, founder of Xiaomi, with Mitu, the company's rabbit mascot.
Photograph by Mark Leong

On to Africa!

Once the world’s most valuable startup, Xiaomi, the Chinese smartphone maker praised for cheap but ‘high-spec’ phones, is expanding sales to Nigeria, Kenya and South Africa in a bid to keep smartphone growth growing as its home market in mainland China slows down.

Driving Xiaomi’s ascent in China was as a capital-light business: no stores, no company-owned factories, little paid marketing.

The deal in Africa, with South Africa-based Mobile in Africa Limited, is much the opposite: a traditional approach with an increasingly commoditized product in smartphones. Xiaomi’s South African partner will lead imports, marketing and support for phones sales, the Wall Street Journal noted.

It’s unclear how Xiaomi will gain traction in markets like India, Brazil and now Africa, as it has said it wants to, if it follows the same model as local competitors.

In India this past quarter, for instance, Xiaomi’s sales experienced their first quarter-to-quarter decline after expanding there last year— almost a 46% tumble “due to fierce competition from Lenovo and Micromax’s Yu brands especially in the higher volume sub-$100 segment,” says Counterpoint Research. It doesn’t rank in India’s top five market share. And if anything, Xiaomi needs to be present in India more than it does in those three African markets, all of which together have barely one-fifth of India’s population.

Xiaomi’s also hurting in its home market of mainland China, and that’s more than just a result of market saturation. Chinese competitors have stepped up their efforts to steal Xiaomi’s crown. Research firm Canalys said Huawei passed Xiaomi for the highest market share in the third quarter.