The Smartphone Shields Are Down

Quarter after quarter, Xiaomi could do no wrong. Less than five years after its founding, the Beijing-based company became the No. 4 smartphone maker on earth, its well-built and relatively cheap devices trailing only Samsung Electronics, Apple, and Lenovo in global shipments. In 2014 the company shipped 57.7 million phones around the world, a more than 200 percent increase from the previous year. Xiaomi estimated its 2015 numbers would reach 80 million to 100 million phones. Then sales hit a wall.

On July 2, Xiaomi Chief Executive Officer Lei Jun said shipments in the first half of 2015 totaled 34.7 million phones, a growth rate of 33 percent over the first six months of 2014. Plenty of smartphone makers would be delighted with that kind of increase, but it was a shocking slowdown for a company used to posting triple-digit gains, especially because it spent much of 2015 expanding into India. The reason was one familiar to almost every other company selling smartphones: Xiaomi’s home market “is increasingly saturated,” according to Bloomberg Intelligence analysts Matthew Kanterman and John Butler. Xiaomi declined to comment.