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Smartphone upstart Xiaomi now ranks third in Singapore

Its success in what has been a market traditionally dominated by Apple and Samsung could be the beginning of a global trend that sees homegrown brands from countries like China and India growing increasingly influential. 

SINGAPORE: Lesser-known smartphone makers are closing in on giants Samsung and Apple, and analysts say the Big Two will continue to see a decline in market share as lower-cost manufacturers increasingly incorporate sophisticated features into their products.

One of these, Chinese smartphone maker Xiaomi, is now number three in the Singapore market after Apple and Samsung, according to data from research firm IDC. The Chinese brand has overtaken more established rivals like Sony and HTC, and accounts for 10 to 20 per cent of all smartphones shipped to Singapore in the second quarter.

Xiaomi's success in Singapore is significant because it has been very tough for brands to make a dent in the Apple-Samsung duopoly here, said Ms Kiranjeet Kaur, Senior Market Analyst at IDC Asia Pacific. "Usually players who rely totally on retail or direct sales find it really tough to survive in the Singapore market. However, in the case of Xiaomi, they decided to have direct sales through its website, and also one- and two-year subscription options through telcos locally."

Director of Corporates for Fitch Ratings Nitin Soni believes that the technology gap between Apple and Samsung devices and those from Chinese makers like Xiaomi will swiftly narrow. "When the Chinese makers are also able to offer devices which have largely similar features, then I think they will start gaining the market share in markets like Singapore as well."

Globally, based on shipment data from research firm Strategy Analytics, Xiaomi's sales still trail the likes of Samsung, Apple, and its Chinese counterparts Huawei and Lenovo. Xiaomi is placed fifth globally - but that is within just four years of operations.

Fitch predicts that Apple and Samsung will continue to see global market share chip away. The rating agency expects Samsung's and Apple's global smartphone shipment market share to decline to around 25 per cent and 14 per cent, respectively, by 2015. This is compared to 31 per cent for Samsung and 15 per cent for Apple in 2013.

Much of this decline is expected to be due to competition from China and India, which boast homegrown brands like Xiaomi, Lenovo, Huawei, and Micromax Informatics. Among these upstarts, the youngest, fastest-growing smartphone maker is Xiaomi. A top-end model from the brand now costs about a quarter or a fifth of what Samsung and Apple are charging for its latest models, regardless of whether you buy the phone on its own, or with a price plan.

Singapore was Xiaomi's first foray beyond Greater China. It has since launched in Malaysia, the Philippines, and India. The firm's Vice-President Hugo Barra says he is happy that the Singapore market is validating their sales approach - Xiaomi predominantly sells direct to customers through its website, and often via flash sales.

"We have been in the market for about five months, so we certainly weren't expecting things to happen so fast," said Mr Barra. "But I think this speaks to a couple of things - it speaks to the gap in the market for a company with the products that we have, from a quality and pricing perspective. But I think most importantly, it speaks to how we do business. We are very heavily focused on social media, where we tell stories, where we speak to fans, where we give things away. We do contests, we try to have fun."

There will be challenges for Xiaomi as it expands globally. For one, its sales support is much stronger in China than in its overseas markets. "In China, the service-level agreement turnaround time for a defective Xiaomi is very short. It might pose challenges in other countries and hit (its) brand image if non-China consumers are not able to get same level of support," said Ms Kaur.

Still, the threat of Chinese smartphone makers like Xiaomi may keep the Big Two on their toes and spur them to focus on winning back market share, rather than spend resources on legal battles. Both firms have reportedly reached an agreement to withdraw their patent lawsuits occurring outside the United States.

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