2014's Asian Land War: Samsung vs Xiaomi

2014.  For some, it was awful.  For South Korean Electronics company Samsung, it was nearly a nightmare.  In last year's third quarter the South Korean company reported a tremendous loss in profits.  The perceived culprit of this loss was Samsung's own Galaxy S5, which failed to sell as well as was hoped, despite having done reasonably well in the US.  The consequences of all this were far reaching; at the corporate level Samsung fired three executives, while  closing a flagship store in the UK.

But what exactly was the seed of all of these problems?

Many might want to think Samsung was undercut by Apple, HTC, Windows, or perhaps even Blackberry, and certainly these competitors had an effect.

But consider Xiaomi.  Though many westerners are unfamiliar with the company due to the fact that their products have so far only been available in China, Singapore, Malaysia, and the Philippines, recently, the company expanded into India. But despite a lack of worldwide recognition, Xiaomi is as of this year the third largest mobile phone manufacturer, a feat accomplished mostly by wrestling the Chinese market from the clutches of Samsung.  The remarkable thing about this fact is not that it happened, but how quickly it has happened; after all, Xiaomi has only been around since August of 2010, and in this brief period of time it has worked its way very quickly to the top of a very competitive market, competing with and surpassing such notable brands as as Sony, Nokia, HTC and Motorola.

Hugo Barra, a former project manager for Google and the current Vice President of Xiaomi, has boasted that in 2015 it will be very likely that Xiaomi will enter the US market. No plans to this have been officially announced, though Xiaomi has made it clear that they will be entering Turkey, Brazil, Russia, and Mexico, all countries with very large markets.  This should not be too shocking considering the ambitions of CEO Lei Jun, who has made it clear that within the coming five to ten years they hope to be the number one manufacturer in the world.  And in some respects it can be said that Xiaomi has already entered the US market. Xiaomi, together with other Asian technology companies, invested $40 million in California based Misfit Wearables.

So what has been the secret to Xiaomi's success?  In Chinese 'Xiaomi' (小米 ) refers to the millet, a small cereal crop still favored in much of the developing world for its resistance to adverse and often arid growing conditions.  This grain, humble yet significant, is perhaps a good model of what Xiaomi strives to be.  In August of this year, Xiaomi announced it would be releasing a fitness tracker, the Mi Band.  We can see the humility of the product when we look at its incredibly low price ($13) of the tracker.

Granted, the product cannot outperform any of the other major players in terms of specs and options, as Xiaomi went for a more minimalist product and a more minimalist app attached to it.  Despite this minimalism, Xiaomi could not help itself and did give the phone one rather interesting feature, a proximity detector that would automatically unlock the phone (assuming your phone is as well made by Xiaomi).  It would not be a surprise to see something like this work its way to other products.  So how did the phone compare?  More than one reviewer of the tracker put it this way: for the $13, whatever flaws the tracker may have can easily be forgiven.   And many people have forgiven it; in fact, one million Mi bands were shipped in just the first three months of the tracker's availability.

Though considering that everyone and their neighbor's cat has a fitness band on the market, perhaps it would be better to take a look at Xiaomi's bread and butter.  This year's phone, the Mi4, rivals both Apple's iPhone6 and Samusung's Galaxy S5.  In terms of design the phone is justly compared to the the iPhone; at first glance the two phones could be mistaken for each other, enough so that one wonders to what extent the design might be plagiarized whole cloth.

Ignoring this point, the product is still well designed, and pleasing to look at.  The phone competes as well at the hardware specs level, surpassing its competitors in some respects (notably the processor, RAM, the battery, and the much more powerful rear facing camera) though not all.  But what really allows the Mi4 to compete is its low price point. It starts at $320 for the lower end 16gb model while the 64gb model comes at $400.  At next year's Consumer Electronics Show in Las Vegas it is expected that Xiaomi will announce this lines next iteration, the Mi5, which is already rumored to be a truly state of the art flagship phone.

So what does all this mean for us, and what wild assertions can we stitch together from these various facts?

What Xiaomi has proven is that the Mobile phone industry is not nearly as entrenched with monopolies as one would suspect.  Perhaps a year ago one would have been laughed at to consider the possibility that Samsung's Asian market would be commandeered by a Chinese start up.  And yet, this came to pass.  This should prove to everyone involved that the market is still open for innovators and investors to jump in and stir the pot up.

We have yet to see if Xiaomi will have an impact globally, but if they do, one could predict them bring smart phone prices down, significantly.  If Xiaomi becomes to phones what Lenovo has become to laptops, the question we will be asking ourselves is how Samsung and Apple can compete against comparable flagships at half the cost.

An expanding and competitive market could be a boon for us consumers.

What are thoughts on the three main players in the mobile phone market?  Envisions many changes, or will these players become trenched into their positions?