“In recent weeks, much has been made in the financial media about the looming threat to Apple from a company many people probably haven’t even heard of,” Bob Ciura writes for Seeking Alpha. “Xiaomi is a smartphone manufacturer that is often referred to as ‘the Apple of China.'”
“That’s because Xiaomi’s business model is to produce devices that look and feel like Apple’s iPhone, yet are much cheaper. For example, on January 15, Xiaomi released a phone called the Mi Note that mimics the iPhone 6. The key difference is, that the Mi Note will cost $375, while the iPhone 6 costs $865 in China,” Ciura writes. “The response from the financial media was predictable. As soon as the new Xiaomi model was announced, it was lauded by some as an Apple killer. However, there is a critical point Apple bears are missing. Xiaomi is a low-margin operator with low-priced devices, whereas Apple reaps significantly higher profit margins with premium-priced devices.”
“This implies that those individuals buying Xiaomi devices do so primarily because of the low cost. This is not true competition to Apple, because those customers would likely not have purchased the more costly Apple device anyway,” Ciura writes. “For this reason, I would argue that Xiaomi steals market share not from Apple, but from other low-cost smartphone manufacturers in China, such as Lenovo and to a certain extent Samsung. That is why the real danger from Xiaomi is to other device makers on the low-end of the price spectrum, not Apple.”
Read more in the full article here.
MacDailyNews Take: Xiaomi is a threat to Apple as Yugo was a threat to BMW.
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