SMARTPHONES: Xiaomi Eyes US, Apple Expands China Green Drive

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Bottom line: Xiaomi’s first-ever quarter-to-quarter sales decline means it’s unlikely to meet its 2015 sales target, while Apple’s latest environmental announcement is part of a broader image-polishing campaign in China that seems to be working.

Xiaomi posts first-ever sales drop

You don’t hear sputtering smartphone maker Xiaomi comparing itself to former role model Apple (Nasdaq: AAPL) too much these days, but both companies are in the headlines today as each pursues its own different agenda. An increasingly desperate-looking Xiaomi is reportedly eyeing the US, as the former high-flyer notches its first-ever quarter-on-quarter decline in smartphone shipments. Meantime, Apple is turning up its China public relations machine with announcement of a major expansion of its environmental protection campaign in the heavily polluted country.

Xiaomi and Apple were often mentioned in the same sentence as recently as last year, when the former was one of China’s hottest companies and pegged by some to become the nation’s first global smartphone brand. During that time Xiaomi’s talkative chief Lei Jun liked to compare his company to Apple, resulting in a war of words at one point after Apple’s chief designer accused Xiaomi of being a copycat.

But all those comparisons seem to be squarely in the past now as Xiaomi’s star rapidly fades and the company loses its cool and trendy image due to lackluster product design and abandonment of its online-centric marketing strategy. The company’s sputtering prospects were on display once again this week, as data tracking firm IHS said Xiaomi shipped just 18.5 million smartphones in the third quarter, representing the first quarter-on-quarter decline ever for the company.

The new total brings Xiaomi’s shipments for the year to 53.2 million, and are making its goal of shipping 80-100 million phones this year look increasingly unattainable. In addition to its fading image, the company has also been dogged by mediocre product reviews, technology problems, and even a scandal after it substituted a lower-cost domestically made screens on one of its phones after previously promising imported ones.

Xiaomi has hoped to offset slowing growth in its home China market by going abroad, and has embarked on a globalization campaign that has taken it into India, Brazil and Southeast Asia. But the company was reportedly avoiding the US due to concerns that it would be vulnerable to patent lawsuits that have kept many smaller Chinese names out of the market.

Now Xiaomi co-founder Lin Bin is being quoted saying that the company is actively looking at the US for its mid- to high-end Xiaomi Note and Note Pro models. (Chinese article) Lin didn’t give any timetable for such a plan, which would likely be spearheaded by Hugo Barra, a former Google (Nasdaq: GOOG) executive poached by Xiaomi 2 years ago. One analyst pointed out that Xiaomi could quite possibly face lawsuits from Apple, and last year’s attack on the company by Apple chief designer Jonathan Ive certainly makes such a move look likely. (previous post)

Apple’s PR Blitz

Next let’s look briefly at Apple itself, which I wrote about earlier this week after CEO Tim Cook showed up in Beijing on his third China trip this year. (previous post) Cook’s frequent China visits reflect the big importance he places on the market, and his trips these days are more often filled with talk about investment in China rather than iPhone sales.

Earlier this week Cook was chatting up Apple’s support for local app developers and also Apple’s accelerated pace of openings for its trademark Apple stores. Now the company has just made another similar PR-type announcement, saying it will sharply boost its construction of solar power plants by building 200 megawatts worth of new capacity in the country. (company announcement) Apple announced earlier this year it would build 80 megawatts of solar farms in China, and said in its latest announcement that construction of half of that was complete.

In its new announcement it also said it will launch a program to help its vast web of China-based production partners become more environmentally friendly. This kind of move is very PR-ish, and is designed to polish Apple’s image in its second largest market. The campaign certainly seems to be having a positive effect, and should help smooth the way for Apple’s future development in this increasingly important market.

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