Xiaomi unseats Samsung as top mobile vendor in China

We knew this moment was coming; we just didn’t know how soon. Upstart mobile phone maker Xiaomi has bumped Samsung from its spot as the leading cell phone vendor in China, according to a new report from Canalys.

In the second quarter of 2014, Xiaomi sold 15 million phones compared with Samsung’s 13.2 million. Samsung’s sales are down from the same period a year ago, where Samsung sold 15.5 million phones. But Xiaomi’s sales have skyrocketed 240% from 4.4 million in the second quarter of 2013.

Xiaomi now holds 14% of the Chinese cell phone market and ranks as one of the top five cell phone makers in the world.

One of the biggest factors behind Xiaomi’s success is its creation of iPhone lookalikes that cost $200-$300 without a contract.

Xiaomi’s operating system is also unique. Called Miui, the software is Android-based but customized for Xiaomi’s users. User feedback fuels weekly updates to the OS, helping to attract a cult following — a very Apple approach to enticing consumers. Fitting, considering the company’s CEO Lei Jun, has more than once been compared to Apple’s legendary leader, Steve Jobs.

The company mostly makes money off the sale of games, apps, and Internet services.

Xiaomi’s success can also be attributed in part to Samsung’s decline in the second quarter. Samsung suffered a near 20 percent drop in profit, inciting investors to quickly sell off the company’s stock after the earnings announcement. Its stock fell 4.5 percent.

For now Samsung is still a major player globally, but Xiaomi is expanding. And a new cell phone market is emerging where cheap beautiful phones reign supreme. If Samsung is going to compete, it’s going to have to offer more dynamic products on the cheap.