(CapitalWatch, Oct. 7, Hong Kong) Xiaomi Corp. (OTC: XIACY; HKEX: 1810) has become Central and Eastern Europe's No. 1 5G smartphone maker, surpassing Apple (Nasdaq: AAPL) and South Korea's Samsung. However, recent developments raise concerns that the Chinese electronics giant may struggle to maintain its leadership.
Strategy Analytics released a report this week stating Xiaomi captured nearly 42% of the region's 5G smartphone market in the third quarter. That's a drastic increase from 4.3% in the three months through September 2020.
Globally, the firm forecasts Apple and Samsung to stay ahead of Xiaomi through the year 2022 in 5G phone sales, but says Xiaomi will maintain leadership in Central and Eastern Europe sales.
"Xiaomi is capitalizing on the absence of Huawei, as well as its own portfolio of high-quality affordable 5G smartphones such as the Redmi Note 9T 5G and Mi 11 5G," said Yiwen Wu, a senior analyst at Strategy Analytics.
And indeed, the company has been doing extremely well as one of its top rivals has struggled under Washington's sanctions. In the second quarter, Xiaomi posted record 64% revenue growth. The company booked $13.6 billion in revenue on $975.9 million in income, an 87% year-over-year increase. Shipments in Q2 reached 52.8 million units.
And while Chinese rivals Oppo and Vivo outpace Xiaomi in domestic sales, the latter has been growing its global market share and reached position No. 2 in global sales overall, surpassing Apple in the second quarter. Samsung was the world leader, with a 19% market share, Xiaomi held 17%, and Apple 14%, according to Canalys.
However, recently, Xiaomi fell under scrutiny in Europe. In late September, Germany launched a probe into Xiaomi's phones after Lithuania alleged they carry built-in censorship capabilities. Specifically, the cybersecurity watchdog said Xiaomi phones detect and censor terms such as "Free Tibet," "Long live Taiwan independence," and "democracy movement," according to Reuters. Lithuania's Defence Ministry outright urged consumers to throw away Chinese phones.
Xiaomi denied the allegations and responded with a dispute while hiring a third party to assess the claims. It did admit to using content filtering software to safeguard users from offensive content such as pornography.
Earlier, Xiaomi vowed to bring three generations of Android upgrades and four years of security patches on its new 11T series for "a better user experience and longer-term data security." The company promised a longer life cycle and latest features on the phones as it attempts to step up to the higher-end market from its earlier focus on affordable phones.
XIACY stock closed at $13.73 per share in OTC, nearly 3% higher, lifted by the general market uptrend. Still, XIACY has lost 23% of its market value in the past six months over macro uncertainties fueled by the regulatory crackdown, chip shortage, continued Covid-19 impact, and political tensions. In Hong Kong, Xiaomi closed nearly 4% higher Thursday, at HK$21.35 a share.