bask in the glow of good news – or rather the lack of the kind of bad news Huawei has recently encountered. But the tech company’s 2021 still looks tough.
Although for a while it looked like Xiaomi might fall against the US authorities as well, it now seems to have avoided that fate. The company said in an exchange filing Wednesday that a U.S. court had revoked all restrictions on the purchase or holding of shares in the company by U.S. investors. The Trump administration placed Xiaomi on a list of “Chinese Communist Military Companies” in January.
However, the windfall profits supercharged by Huawei’s woes are unlikely to last. Smartphone shipments to China have risen sharply in recent quarters as more consumers have switched to 5G smartphones. This trend will likely slow down.
And while Xiaomi is making inroads into markets like Latin America, it faces stiffer competition at home. Apple, vivo and OPPO have all taken market shares left by Huawei. And Honor, which was sold by Huawei to a Chinese state-led consortium last year, will soon launch new smartphones not subject to U.S. sanctions. The company has confirmed that its new phones will be equipped with Qualcommfrom
new Snapdragon 778G chips and Google services.
Maintaining its new market share by differentiating itself from its competitors is an obvious challenge. Overall, innovation is increasingly difficult to find in the smartphone arena. Xiaomi’s research and development spending hit 3.8% of revenue last year, up from 2.3% in 2015. But it’s still not high compared to companies like Apple, which are pulling off the net. much higher margins. Xiaomi probably needs to spend more, especially if its new foray into electric vehicles is serious.
Xiaomi took advantage of a windfall last year – in part for reasons that had little to do with the company itself. The coming year could be more difficult.
Write to Jacky Wong at [email protected]
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