Xiaomi Becomes World's No.2 Smartphone Brand: Is Apple's Reign at Risk?

Xiaomi has overtaken Apple to become the world's second-largest smartphone manufacturer in terms of global smartphone sell-through volumes. According to a report by Counterpoint, Xiaomi has been one of the fastest-growing smartphone brands in 2024, despite its sales volumes remaining flat MoM as compared to Apple's seasonal decline during the same period.

And while Xiaomi's ascendancy is a monumental achievement, it doesn't come as a surprise given the brand's price competitive 5G phones and economic recovery of Xiaomi's key markets in the past few quarters. However, Apple might not be too concerned about Xiaomi's dominance.'

Key Drivers Behind Xiaomi's Growth

Before we dive into Apple's lack of concern, let's understand the reason for Xiaomi's rise to second in the global smartphone sell-through volumes.

Commenting on Xiaomi's strategy, Research Director Tarun Pathak said, "Xiaomi has adopted a leaner product strategy this year, focusing its energies to create one hero model per price band, rather than launching multiple devices in one segment. Besides, it has also re-energized its sales and marketing focus while continuing expansion into newer markets and consolidating its position in existing markets. While entry-to-mid-tier devices continue to show strong performance for Xiaomi, it has also made inroads into the premium segment with foldable and 'ultra' devices."

Xiaomi's ascendence to second spot can be largely attributed to its aggressive growth in recent quarters. Moreover, in large scale developing regions, Xiaomi focuses on delivering an abundance of options in the affordable and mid-range segments. Moreover, these affordable and mid-range devices have a high success rate in developing countries, where users tend to look less disposable income and demand the best bang for their buck.

Impact on Apple

While Xiaomi has managed to displace Apple, it might only be a momentary victory for the Chinese smartphone maker.

The Counterpoint report only accounts for iPhone sales until August 2024. However, Apple launched the next generation iPhone 16 series earlier this month, while units will only start shipping later this week. Historically, iPhone shipments tend to rise in the fourth quarter of the year. While analysts say that the iPhone 16 series has not come out of the gate swinging, sales will likely surpass Xiaomi in the coming months.

However, the most important factor is revenue. While Apple may not be the biggest smartphone brand in terms of volume, it is the largest brand in terms of revenue. Apple also dominates the premium and ultra-premium smartphone segments globally. Operating exclusively in these segments also has its advantages as profit margins in the premium segment are much higher than in the affordable and mid-range markets.

Beyond iPhone Sales

But Apple don't rely on iPhone sales alone for their smartphone revenue. The Cupertino tech giant also makes huge profits on iPhone services like iCloud, Apple Arcade, Apple Music, News+, and more. As an Apple users, you can spend anywhere between $20 to $100 based on the region. Compare these figures to a Xiaomi or even Samsung smartphone, and those figures will have to be nearly halved.

While Xiaomi's ascendance to second place is no small feet and the result of constant innovation and perseverance from the brand, it is unlikely to impact Apple unless the Chinese smartphone maker expands its influence in the premium segment. However, Xiaomi has shown potential in ultra-premium segment with the global launch of the Xiaomi 14 Ultra and the release of a new foldable smartphone. But for now, Apple's reign at the top doesn't appear to be at any risk.