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Xiaomi fires warning shots in SA’s smartphone market

Read time 6min 30sec
The Xiaomi Mi 10 Ultra.
The Xiaomi Mi 10 Ultra.

Chinese smartphone maker Xiaomi is looking to snatch market share from Huawei and Samsung, as competition in the market heats up in South Africa.

This was revealed yesterday by Nicola Nell, Xiaomi marketing manager in SA, in a virtual interview with ITWeb.

Xiaomi, which entered the South African market six years ago, is also targeting the lucrative postpaid smartphone market, recently signing a distribution agreement with Vodacom.

The company is looking to get deals with the other three network operators in the next few months.

Although 5G networks are still in their infancy in SA, Xiaomi says it’s looking to bring cheaper 5G smartphones into the country.

South Africa’s 5G networks will only expand when telecoms regulator the Independent Communications Authority of SA issues the much-anticipated high-demand spectrum. However, this process has been repeatedly delayed.

The company is also looking to exploit the internet of things (IOT) market in SA.

Potential plans are also afoot to open the first Xiaomi experience store at the Mall of Africa in Johannesburg, with three of these facilities, known as Mi Stores, planned across SA.

Xiaomi’s move into the tightly-contested market comes as the pace of recovery for the smartphone market accelerated in the first quarter, with 25.5% year-over-year shipment growth, according to market analyst firm IDC.

Several other Chinese smartphone-makers − such as BBK Electronics-owned brands Vivo and Oppo, and Tecno − are also eyeing the lucrative South African market.

IDC notes that as the smartphone market recovers, there is a major shift in the competitive landscape. It says in Q1 2021, Huawei exited the top five for the first time in many years, after suffering heavy declines under the increased weight of US sanctions.

Taking advantage of this are Chinese vendors Xiaomi, Oppo and Vivo, which all grew market share over the last quarter, landing them in third, fourth and fifth places globally during the quarter, with 14.1%, 10.8% and 10.1% share, respectively.

Statista says in June 2021, Samsung was the market leader locally, with 45.28% market share of mobile device vendors in SA. Huawei ranked second, with almost 29%, followed by Apple with 16%.

Growing team

Nell joined Xiaomi in September last year, becoming the first South African employee for the Chinese firm. Since then, she says, more people have been employed. “This week, we hired two new people for our IOT and smart products. We now have a team of 12 employees.

“We used to sell our products through distributors. However, in order to entrench ourselves in the market and grow, we had to set up a team in SA.”

Nell notes Xiaomi was always available in the open market. “It was for the prepaid market. You could buy our products using cash.”

Now it is targeting the lucrative postpaid market through mobile operators.

“So to build the brand, we needed a really dedicated team right here.”

However, she points out there is a lag in bringing as many smartphones as expected to the local market because of the rigorous testing processes required by the mobile operators.

The Xiaomi Mi Mix Fold.
The Xiaomi Mi Mix Fold.

“When it comes to launching with mobile operators, they’ve got specifications of how they want their phone to work on their network. So we get the phones from China and we need them to get tested by the networks and sometimes the configurations that we get from HQ may not work with the mobile operators' networks, leading to our devices failing the test.

“There would be nothing wrong with the device, but just that they won’t be working according to the system that they want. So this is not as easy as the open or prepaid market, where you just purchase the device and start using it. In the postpaid market, it has to go through some processes.”

Nell acknowledges the fierce competition in the South African market.

“Competition is rife with the OEMs [original equipment manufacturers]. You have your top players who are in SA – your iPhone and your Samsung – who have been in the country for a long time. They have positioned themselves at such a level that people think that, for example, iPhone is better than everything else, which is not necessarily the case.”

Nonetheless, she says Xiaomi is not looking to go head-to-head with Apple’s iPhone in SA.

“Our target market is Huawei and Samsung. We are targeting that kind of customer. What I always say is when you get your hands on a Xiaomi smartphone, you will be blown away by the capabilities of the phone for the price point.

“South Africans have a tendency to think that when they see a cheaper product, then they feel it’s an inferior product. However, this is not the case because our products are very technology-forward and the pricing is really great.”

According to Nell, the company is looking to launch three new devices – Redmi Note 10 Series – in the South African market on 14 July, one of which is a 5G device.

Attracting a diverse market

Arnold Ponela, research analyst at IDC, believes Xiaomi has a good chance in SA, as the vendor aims to supply high-spec phones at low prices and “this is exactly what will catch South African consumers. The market is diverse, and it has huge growth potential as the demand for digital devices continues to expand.

“Telcos play a key role in supporting OEMs by subsidising most smartphones to promote their network. This leads to increased sales of smartphones in South Africa. Bundling smartphone contracts and data packages is another significant contributor towards the high sales volumes.”

According to Ponela, SA is a lucrative market for smartphone producers due to its high smartphone penetration rate.

Nicola Nell, Xiaomi marketing manager in SA.
Nicola Nell, Xiaomi marketing manager in SA.

“The market has been driven by entry-level smartphones and mid-range phones, which made it possible for many people to own a smartphone. Most Chinese smartphone brands are able to provide quality entry-level smartphones, hence they have seen tremendous success in SA.

“Coupled with the increased access to broadband connections and decreasing data prices, smartphone ownership has significantly improved. SA is also lucrative due to its postpaid market structure, which has seen telco operators play a key role in providing subsidies to smartphone vendors.”

Chris Henschel, director at Cellucity, believes Xiaomi has a well-developed brand that offers exceptional value for money, which will allow it to compete in the South African market, where affordability is often one of the driving purchase decisions.

“Xiaomi, as a brand, has a massive collection of IOT devices and this makes them a strong contender when looking at the ecosystem they provide consumers.

“They have a plethora of smart home devices and appliances, which work on the Android platform, and this allows them to catch potential customers, as they may not initially purchase a Xiaomi-branded smartphone, but they may very well purchase a robot vacuum cleaner or smart home security camera set-up from them. This allows consumers the opportunity to experience the brand and their quality, which may lead to their subsequent smartphone purchase being a Xiaomi,” he concludes.

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