SMARTPHONES: Xiaomi Limps, LeTV Eyes Big Gains in Crowded Market

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Bottom line: Competition will remain fierce in China’s smartphone market this year, as major players including Huawei and Xiaomi compete aggressively with newcomers like LeTV for market share.

LeTV sets ambitious smartphone goal

The sputtering Xiaomi and high-flying LeTV (Shenzhen: 300104) have become 2 of China’s first smartphone makers to announce 2015 sales figures, as broader industry data show just how crowded the field has become. Xiaomi’s first-look sales figures come in a microblog post from one of its executives, and show the company missed its 2015 sales target by around 10 percent. LeTV’s figures come from an emailed statement, and say the company sold a relatively modest 4 million smartphones last year following its entry to the space.

Then there’s the broader industry data that points out 7 of the world’s top 10 smartphone brands last year came from China. That report notes that among the top 10, only Samsung (Seoul: 005930), Apple (Nasdaq: AAPL) and LG (Seoul: 066570) were non-Chinese, and that a surging Huawei overtook Lenovo (HKEx: 992) to become the world’s leading Chinese brand.

Let’s begin with the big-picture data, which show the global smartphone market growing by 10.3 percent last year to 1.29 billion units, according to Trendforce, the first research house to announce annual figures. (Chinese article) China accounted for a hefty 41 percent of total global smartphone shipments, as a vibrant local industry flooded the market with a wide range of models at very affordable prices.

Within the Chinese brands, Xiaomi sold 72 million smartphones, making it the world’s fourth largest player behind Samsung, Apple and Huawei, according to Trendforce. A company executive also said on his microblog that Xiaomi sold more than 70 million smartphones, making it the biggest brand in China, without providing more specifics. (microblog post; English article; Chinese article)

Industry watchers will know the final sales figure for Xiaomi falls well below the 100 million mark that was the company’s original goal at the start of last year. Xiaomi later reduced that figure to 80 million after its momentum began to slow sharply, and the final figure is about 10 percent below even that.

Everyone will be watching to see where Xiaomi sets its sights for the year ahead, as that will show how the company believes it will do in the current environment and what kind of growth it is targeting outside China. The company’s 2015 sales translate to just 20 percent growth year on year, a far cry from the triple-digit growth it recorded in the previous 2 years when it exploded onto the global smartphone scene.

I do expect that Xiaomi’s growth could pick up this year, perhaps to the 30-40 percent level, as some of its investments in overseas markets start to bear fruit. But it will have difficulty regaining its fading momentum in China, and I wouldn’t be surprised to see the company slip this year from its spot as China’s second biggest domestic brand.

LeTV’s Adjustment Period

Next there’s LeTV, whose data is a little harder to analyze because it only began selling smartphones around April and seems to have made some adjustments after that that may have dampened sales. The company said it sold over 4 million smartphones last year, which doesn’t seem like a huge number. But it added it sold more than 1 million of those in November alone, hinting its sales may have surged at the end of the year.

With many of its early problems now resolved, including a minor tussle involving one of its chief manufacturing partners, LeTV looks set to embark on a major campaign for its smartphones this year. That included the recent launch of sales in India, and also LeTV’s first-ever attendance this month at the world’s top consumer electronics show in Las Vegas.

As it ramps up its smartphone operations, the company has just revealed that it’s aiming to sell 15 million smartphones this year — nearly 4 times last year. I expect at least three-quarters of that will come from China, and we can probably expect to see equally aggressive China targets from Huawei and possibly the struggling Lenovo. That means the year ahead could be quite difficult and unprofitable for everyone in China, as the big players refuse to surrender and continue to aggressively price their products in pursuit of market share.

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