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With the launch of Redmi K20 Pro, Chinese tech firm Xiaomi is trying to gain ground in the premium segment of the smartphone market. The company had previously introduced the Mi Mix 2 in this segment but it failed to take off.
With the K20 Pro, Xiaomi has launched a flagship phone in the ₹30,000 range, taking on the likes of OnePlus, which offers the same top-of-the-line Snapdragon 855 processor. “I have seen more loyal customers for OnePlus. The kind of experience and the kind of user base OnePlus has, I think people would want to go to OnePlus. When they are spending ₹30,000, they want to be associated with a brand that is already regarded as a premium phone (sic),” Shobhit Srivastava, Research Analyst, Counterpoint Research, told BusinessLine .
According to data from Counterpoint, the premium (above ₹30,000) segment in India grew by 33 per cent annually (in terms of shipments). OnePlus dominated this segment, with a 43 per cent share, followed by Samsung, a distant second at 22 per cent.
“Xiaomi has been trying to get into the premium segment for a while. They launched the Mi Mix here which didn’t really do well,” Srivastava said. Xiaomi sells a lot of phones in the lower-priced segments, which is not really profitable, he added.
“Most of the sales that Xiaomi is doing is in the entry-level or in the mid-level. The premium segment is where the real money is to be made because the margins are higher. Xiaomi definitely wants to increase their average selling price (ASP) to compete against the likes of Vivo, Oppo, OnePlus,” Srivastava said.
Competition in mid-level
Xiaomi is seeing competition in the mid-level segment as well (₹10,000 to ₹20,000) from the likes of Realme, a sub-brand of Oppo. In the second quarter of 2019, Realme captured 9 per cent of India’s overall smartphone market share from 1 per cent a year ago. Oppo, Vivo, and Realme, all part of China’s BBK group, had a collective market share of 28 per cent, equalling Xiaomi’s, in the second quarter.
Xiaomi claimed to have a profit margin of less than 5 per cent on hardware and looks to tap into its internet services to generate more revenue, however, analysts feel this is easier said than done.
“In China, it is easy for Xiaomi to make money from services because there is no Playstore in China and they sell apps through their own app store. But in India, that kind of money is not made from services. In the premium segment, I would say not many people use OEM-based apps like Xiaomi is expecting,” Srivastava explained.
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