Xiaomi , China’s largest smartphone manufacturer and the world’s third largest mobile phone brand, has lost its momentum. 

SCMP reported that the company has recently laid off more than 900 staff after its sales in the June quarter dropped 20% year-on-year to $10.3 billion (70.2 billion yuan), missing analysts’ estimates and indicating a steeper fall from the first quarter.

Net income in the second quarter also missed estimates, falling 83.5% to $205 million (1.4 billion yuan) from $1.2 billion (8.3 billion yuan) a year earlier.

China News reported that some analysts have pointed out several factors hindering Xiaomi’s development and caused it to go downhill quickly.

According to the report, the first reason is that nearly 50% of the company’s total income comes from overseas markets. This differentiated Xiaomi from other Chinese competitors and helped it become the world’s third biggest smartphone maker.

However, China News noted that the global mobile phone market has declined in the past 13 years due to rising inflation.

In addition, the outlet, citing Digitimes Research, also reported that the world’s smartphone market would go into a recession of up to 10% this year.

Yan Lanxin, deputy director of IDC, explained that China was the first to suffer when the global smartphone market started falling. At that time, smartphone makers, including Oppo and Vivo, had to lower their product prices to reduce inventory. But Xiaomi was still growing in overseas markets such as Southeast Asia and India.

As a result, Yan added while other Chinese competitors realized they had to adjust business strategies to cope with new customer demands, Xiaomi was still busy making money abroad. It thus missed this opportunity to adapt itself gradually like others.

The second reason that affects Xiaomi’s growth is the return of the controversial telecoms behemoth Huawei.

As reported by China News, Huawei was once the largest smartphone manufacturer in China and the third biggest worldwide. But due to the U.S. sanctions over the past 4 years, the company lost ground in China, and Xiaomi jumped to second place in the market.

But things changed since November 2020 when Huawei returned with its new sub-brand, Honor. This new smartphone brand did so well that it could help Huawei quickly regain market share in China.

In the June quarter this year, while all other Chinese phone makers reported a loss in sales, Huawei took the lead with 19% of market shares and saw a nearly 90% surge in shipments.

Gai Xinshan, director of research agency CounterPoint, said that Xiaomi is now facing another headwind as Chinese consumers are more willing to pay for Huawei Honor’s products.

The third factor is the current conflict with India, Xiaomi’s biggest market abroad.

Since the end of last year, India’s tax department has carried out massive raids on Chinese smartphone makers such as Xiaomi, OPPO, and vivo operating in the country. 

In April, Indian tax regulators fined the company $725 million in assets for allegedly avoiding tax. Xiaomi was found guilty of illegally transferring funds overseas under royalty fees.Additionally, AP reported that in 2021, the U.S. Department of Defense blacklisted Xiaomi and eight other Chinese firms for alleged military ties.

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