Xiaomi's sales volume catching up with Huawei? It's a bit difficult

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When the sales of two mobile phone manufacturers are similar, it doesn't make much sense to look at the data rankings of research companies. Different research companies use different estimation methods, and the results they obtain are often different. Therefore, different research companies give different rankings. For example, in the global smartphone sales in Q3 2014, the data released by IDC showed that Xiaomi sold 17.3 million phones, ranking third, and Huawei did not make it into the top five; while the data released by Gartner showed that Huawei sold 15.93 million phones, ranking third, and Xiaomi sold 15.77 million phones, ranking fourth.

In addition, in the mobile phone industry, some research companies count shipments, while others count final sales. The remainder of shipments minus sales is the inventory of products in the channel, which has not yet reached consumers. Although the goods are not in the hands of manufacturers, if there is a large inventory, it will affect the subsequent product sales. For example, in 2014, Xiaomi's shipments were 61.12 million units, while the sales monitored by Sino were about 45 million units. There is a difference of 15-16 million units, which may be due to the goods in the channel, or the data itself has some problems.

Recently, Xiaomi and Huawei have been arguing over who has the largest domestic market share in Q1. Xiaomi cited research data from IHS Technology: Xiaomi sold 14.2 million units in Q1, with a market share of 14%, ranking first; Huawei sold 11.2 million units in Q1, with a market share of 11%, ranking second.

Figure 1: IHS Technology released China’s smartphone market share in Q1 2015

Some people in the industry have argued for Huawei, focusing on two aspects, which are similar to what I have discussed above. Citing GfK data: Huawei ranked first in the domestic market in March, with a share of 13.57%, and its share in the previous two months was basically above 11%, so they believe that the IHS data is problematic.

Figure 2: GfK survey on the changes in market share of Huawei, Apple and Samsung in China’s smartphone market over the past six months

Another point of view is that IHS counts shipments, while GfK counts final sales. The different calibers make GfK's statistics more meaningful.

In fact, when the two manufacturers have similar domestic scale, it is meaningless to discuss data and rankings, as anyone can win. Instead, it is the circumstances behind these data that are worth paying attention to.

Judging from the sales data, Xiaomi may find it difficult to achieve the sales target of 100 million units

In 2015, both Huawei and Xiaomi set a sales target of 100 million units. In the domestic market, the sales of Xiaomi and Huawei are similar. In the overseas market, Xiaomi's sales share is less than 5%, while Huawei's share is about 40%. From this point of view, the sales gap between Xiaomi and Huawei is still relatively large.

Let's do some calculations with specific numbers. According to data released by IDC, Huawei sold 17 million units in Q1 2015; SA's research data is 17.3 million units, which is quite close. In Q1 2013, Huawei sold 9.3 million units, accounting for 17.8% of the annual sales (52 million units). In Q1 2014, Huawei sold 13.7 million units, accounting for 18.2% of the annual sales (75 million units). Using historical data, it can be estimated that Huawei's annual sales in 2015 will be between 94 million and 98 million units, which is quite close to the 100 million unit target.

Xiaomi sold 10.4 million units in Q1 2014, accounting for 17% of the annual sales (61.12 million units), which is similar to Huawei. According to IHS data, Xiaomi sold 14.2 million units in China in Q1 2015, and the global sales are expected to be 15 million units, which means the annual sales will be about 88 million units, which is far from the target of 100 million units.

Figure 3: Calculation of Huawei and Xiaomi’s 2015 annual sales based on Q1 sales and previous years’ data

From the perspective of product layout and development, Huawei has great potential for growth

The Huawei brand is gaining more and more attention and support around the world. According to a consumer survey conducted by Ipsos in 32 countries around the world, Huawei's brand awareness increased from 52% to 65% in 2014, and its brand net recommendation value rose to 43%, which means that more than 40% of Huawei mobile phone users have recommended Huawei products to people around them, and word-of-mouth marketing has achieved good results.

From the perspective of product layout, Huawei has popular products in the price range of 599 yuan to 3699 yuan. In the price range of 3000-4000 yuan, the sales of Mate7 reached 4 million units in 6 months; in the price range of 2000-3000 yuan, the sales of P7 reached 6 million units in 10 months; in the price range of 1000-2000 yuan, the sales of Honor 6 and 6plus reached 5.5 million units; in the price range below 1000 yuan, the sales of Honor 3C exceeded 8 million units, and the sales of Honor Play 4X exceeded 6 million units.

In Xiaomi's product layout, the top-end version of Xiaomi Note, which costs more than 3,000 yuan, has a greater symbolic significance, and its sales volume is not expected to be very large. The four product lines, Redmi, Redmi Note, Xiaomi, and Xiaomi Note, are priced between 599 and 2,299 yuan. Based on the current product line, it is difficult to achieve a significant sales breakthrough.

Let’s take two typical price segments for analysis. Xiaomi has almost no products in the 3,000-4,000 yuan price segment, while Huawei has become the largest market share in this price segment in China, surpassing Apple and Samsung.

Figure 4: GfK survey of the market share of various manufacturers in the 3,000-4,000 yuan price range in China in the past six months

In the 799-999 yuan price range, Xiaomi's main product is Redmi Note, while Huawei's is Honor Play 4X. Redmi Note was launched in March last year, and by last year's Double 11, it had achieved sales of nearly 10 million units in 9 months, with an astonishing growth rate. On Double 11, Redmi Note sold 384,000 units. Honor Play 4X was launched at the end of October last year, and achieved sales of over 6 million units in more than 5 months, with a growth rate comparable to that of Redmi Note. On April 8, the day of Honor Carnival, Honor Play 4X achieved sales of 600,000 units. At this growth rate, Honor Play 4X's total sales are expected to exceed Redmi Note, and Xiaomi's main price range is challenged.

Although Xiaomi has typical dark horse qualities and its growth rate has always been beyond common sense, Huawei leads in overseas markets and mid-to-high-end product lines, while Xiaomi's mid-to-low-end product lines are threatened. Overall, Huawei's momentum is stronger and Xiaomi may find it difficult to catch up.