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Xiaomi dethrones Samsung in Chinese smartphone market

Xiaomi has surpassed Samsung as the top-selling smartphone brand in China. A relatively obscure name abroad, the nascent company is now the world's fifth-largest smartphone maker.

In April 2010, the Chinese tech entrepreneur Lei Jun helped found Xiaomi, a company he envisioned would provide a user-friendly alternative to Google's Android. Four years later, the young tech enterprise has overtaken industry heavyweight Samsung as China's best-selling smartphone brand.

In the past year, Xiaomi's sales in China have jumped from 4.4 million to 15 million units, according to a #link:http://www.canalys.com/chart/index.html##display-291:report published Monday by the technology research firm Canalys#.

By comparison, the Korean tech giant Samsung, which had held the top spot in the Chinese smartphone market for more than two years, sold 13.2 million devices, down from 15.5 million a year ago.

With a 14 percent share of the Chinese smartphone market, Xiaomi, meaning "little rice," is now the fifth-largest smartphone maker in the world.

Keeping costs low

Market analysts attribute Xiaomi's success to a combination of sales, marketing and branding strategies, a recipe that helped a relatively unknown handset maker achieve growth of 240 percent in just a year.

Xiaomi values its phone for nearly the same amount it costs to buy and assemble the materials. As a result, Xiaomi phones cost about a fifth as much as those from Samsung, even if the processors are the same.

Capitalizing on this narrow margin, Xiaomi sells its models for up to a year and a half, unlike Samsung and other makers who introduce new models every six months. This way, Xiaomi takes advantage of drops in component costs over time.

The company also makes money from selling accessories, including apps and games.

Imitating the 'Cult of Apple'

Xiaomi does all of this without owning a single physical store - all of its business is conducted online.

To further reduce overhead costs, Xiaomi relies on social media and word-of-mouth for its advertising. It keeps consumers involved in the evolution of its operating system, MIUI, by encouraging them to help design and give feedback on its software.

But its open-source attitude has not prevented critics from accusing Xiaomi of riding the wave of Apple's prior successes in the smartphone market.

Some have referred to Xiaomi's smartphone as the "Chinese iPhone," noting its resemblance to Apple's trademark product, and Lei, Xiaomi's co-founder and CEO, as the "Steve Jobs of China," for often sporting a black polo shirt, jeans and black Converse shoes.

el/cjc (Reuters, AP)

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