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Xiaomi's stumble allows Apple to reclaim No. 2 spot in smartphones

Xiaomi suffered a setback in the third quarter as it dealt with the fallout from a global chip shortage as well as increased competition in the market.

The Chinese company, which only recently surpassed Apple (AAPL) as the world's second-largest smartphone manufacturer, fell to third place in the three-month period ending September, according to Counterpoint Research and Canalys.

Xiaomi said in its earnings report on Tuesday that the ongoing semiconductor shortage had had a significant impact on its smartphone business, which it expects to continue into the first half of next year.

In a conference call with investors, Xiaomi President Wang Xiang said, "This year, we are facing a very unique backdrop, which is a global component shortage." "The scarcity of resources is a significant barrier for us."

In the third quarter of 2021, the company shipped 43.9 million smartphones worldwide, representing a decrease of approximately 6 percent compared to the same period the previous year.

In a statement, Xiaomi described smartphones as the "cornerstone" of the company's business, which also includes connected devices such as smart home appliances. With plans to begin mass production in the first half of 2024, the company has recently announced a push into electric vehicles as part of its overall strategy.

After passing Apple to become the world's second best-selling manufacturer this summer, it piqued the interest of investors. Shipments from the Beijing-based company increased significantly in the three months ended June, coming in second only to those from Samsung in terms of growth (SSNLF).

Setbacks on supply

In the years since then, however, Xiaomi has been hammered by supply chain issues.

As Tarun Pathak of Counterpoint Research points out, while component shortages affected virtually every vendor, Xiaomi faced additional difficulties as a result of its extensive product lineup.

According to him, the company offered more than 50 different smartphone models in the most recent quarter, compared to Apple's approximately 14 different models during the same period.

Pathak explained that this adds complexity to the situation and "makes it more difficult." This is because you're dealing with a diverse collection of components.

He went on to say that Apple's relative lack of exposure to the issue helped the company reclaim second place in the third quarter.

According to Canalys Research, Apple's iPhone 13 sales were particularly strong, which helped the company. According to a recent report, Apple captured 15 percent of global shipments, which was only 1 percent more than Xiaomi's market share.

Pathak, on the other hand, cautions against dismissing Xiaomi.

Given the firm's strong performance in the first half year, which coincides with upcoming events such as Chinese New Year, he believes it has a good chance of regaining its second-place ranking.

According to Pathak, Xiaomi's ultimate goal — becoming the world's most valuable company — is also not out of the question.

The CEO stated that the company would need to keep its position as a leader in two of its most important markets, China and India, while also expanding its presence in other countries, such as the United States.

According to Pathak, "If they [achieve] number one status, it cannot be due solely to the efforts of these two countries." It is worth noting that "the United States is the world's third largest [smartphone] market, which is notably absent from Xiaomi's portfolio."

Xiaomi reported revenue of 78.1 billion yuan ($12.2 billion) for the third quarter of 2018. This represented an increase of 8% over the same period the previous year, but it was slightly less than the analysts had predicted it would be.

Profit increased by 25% to nearly 5.2 billion yuan ($814 million) during that time period, slightly exceeding analyst expectations but falling short of expectations.

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