Why Xiaomi could be the next new powerhouse in mobile hardware.

The Chinese cell phone maker Xiaomi is gaining market share at an incredible pace with over 50 million users on the company's MIUI android based operating system. The company founded in 2010 is now the world's number 6 producer of handsets selling 18.7 million handsets in 2013 with a goal of selling 60.0 million handsets in 2014. Not only are sales growing at a rapid pace, but geographic expansion is also in the works with plans to enter Brazil, Russia, Mexico, India as well as several other countries.

This has big implications for the smartphone industry as Xiaomi is running their business at low margin with high growth. This could further propel the dominance of Android and potentially be a big threat to Apple. According to the IDC Android had 80.1% global smartphone OS market share based on 1Q14 shipments up from 75.3% as of 1Q13 and 59.2% in 1Q12. Apple's IOS has actually lost market share with only 15.2% in 1Q14 down from 17.1% in 1Q13 and 23.0% in 1Q12. Xiaomi still appears to be in the early stages of their growth and as they expand internationally it seems possible that they could pose a big threat to Apple.

The success of Xiaomi has implications that go far beyond hardware and raise questions over how their growth will affect the value capture of mobile computing overall. The success of Xiaomi seems to indicate that the hardware part of the business is becoming commoditized and that the most value could be captured by the companies that are able to sell applications and ads.

Xiaomi impressive growth and potentially marketing changing impact raise some important questions. If Xiaomi is a threat to Apple do they help Google? Even though Google does not have a big presence in China will Xiaomi more directly benefit Google as they expand to other countries? If Android completely dominates the mobile OS market how will that affect mobile search activity and mobile ads? 

http://www.businessweek.com/articles/2014-06-04/chinas-xiaomi-the-worlds-fastest-growing-phone-maker#p1

http://www.idc.com/prodserv/smartphone-os-market-share.jsp