US/China Tech Wars: Could Xiaomi Actually Challenge Apple?

US/China Tech Wars: Could Xiaomi Actually Challenge Apple?

Since stock prices for Apple, Inc.  (NASDAQ: AAPL) hit their recent lows toward the middle of 2013, we have seen a steadily building uptrend as investor confidence.  To some, this might have come as a surprise as new company CEO Tim Cook has been on the receiving end of a good deal of criticism.  Whether or not all of this criticism is truly deserved is another question.  In any case, it has been clear that the regime change from Steve Jobs to successor Cook was received with a good deal of skepticism.  But the latest activity in the stock price and the latest quarterly earnings results have started to calm some of these concerns and bring the company back into a more positive light.

Rising Competition

By nearly all accounts, the latest quarterly earnings results from Apple were highly impressive.  “Second quarter results showed profits at $11.62 per share along with revenues of $45.6 billion,” said Jonathan Millet, markets analyst at ForexMinute.  “This was better than Apple’s original revenue guidance (which topped out at $44 billion), and solidly beat the consensus estimates that were put forward by market analysts.”  These estimates were calling for earnings to come in at $10.18 per share with the sales numbers showing a total of $43.53 billion, so the upside surprise certainly brought Apple some more positive attention.  

So the real question going forward will be whether or not Apple’s rising global competition will place any limitations on these numbers in coming quarters.  One of the names that has been coming up recently is XiaoMi, which has been described as the “Apple of China.”  The goal at XiaoMi is to offer high-end mobile devices at low-end costs, and the company has used social media outlets to make large advances in market share over the last few years.  Most of this progress has been seen in mainland China, however, as the company has not gained much traction in other markets.

Premature Distinction?

But when we look at the chart below, we can see that XiaoMi still has a good amount of ground to make up before we can say there is a chance for the company to command broad market share on a consistent basis.

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To its credit, XiaoMi is still a relatively new player in the game and the company actually eclipsed the sales performance seen at Apple for a short period in 2013.  XiaoMi will continue to be a small-cap tech player to watch going forward, as there are still possibilities for mergers and the company already has an established presence in the world’s largest smartphone market.  Whether or not XiaoMi is a true competitor for Apple in terms of market share and consumer reputation remains to be seen.  But few companies have been able to post these types of gains and take on the tech titans in such short order.  XiaoMi’s next efforts in Singapore will help us gage the longer term potential for the company.  

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