Apple Inc. Should Be Worried About This

Chinese consumers are spending more time using apps on Xiaomi phones than Apple's devices -- the first time Apple's been beaten in the category in six years.

Jul 9, 2014 at 12:00PM

Xiaomi's popular smartphone, the Mi 3. Source: Xiaomi.

iPhone users are a loyal bunch. They typically stick with the device through upgrade cycles and spend more time using their devices than Android users do. That is until now.

A new report by Flurry shows that Apple's (NASDAQ:AAPL) iPhone users in China have been unseated in their app usage by smartphone newcomer and rising star Xiaomi. The new data should be a bit disconcerting for Apple, and for Samsung (NASDAQOTH:SSNLF), as both companies face increasing competition from Chinese vendors.

Recreating the ''Apple Magic"
Flurry took a random sampling of 23,000 smartphone devices in China back in January and looked at how much time they spent using apps. What they found is that Xiaomi users spend 7% more time in apps than iPhone users do, and Samsung users spent 14% less time in apps than iPhones users. This is notable considering that for six years Apple has retained this crown.

Iphone Flurry Apps
Xiaomi users are more engaged with their phones. Source: Flurry.

In a blog post, Flurry said, "This is the first time we've seen an Android smartphone catch up to the iPhone's most important engagement metric — and exceed it ."

Most of Xiaomi's users spend their time in entertainment and media apps, but the more important point is that the so-called "Apple Magic" that the iPhone maker supposedly has in keeping users engaged, has been recreated by Xiaomi.

That wouldn't be such a bad thing if Xiaomi's engagement didn't influence sales, but it does.


Apple is selling the iPhone 4 again in India as a lower-priced offering. Source: Apple.

More than just engagement
It would be easy to try and ignore Xiaomi, considering the company launched its first phone in 2011, and only launched its first tablet this May. But in the first quarter of this year Xiaomi held 10% of the smartphone market in China -- taking the No. 3 spot while Apple holds the No. 4.

This company is clearly a growing problem for Apple in China.

But Xiaomi has taken its toll on Samsung as well. Just this week Samsung said its Q2 profits will be about 24% lower year-over-year, in part because of "increased competition" in the Chinese market. Considering Xiaomi is continually growing its market share in China and its users are more engaged than Samsung users, it's not hard to figure out who the company is talking about.

Foolish takeaway
Much of Xiaomi's influence has been confined to China, but the company has plans to expand into 10 new markets by the end of this year -- including Brazil, Russia and Mexico. As this happens, we'll know more about whether or not the company can create the same user appeal it has in its own country.

As Xiaomi launches devices with good specifications at lower costs, it's going to be difficult for Apple to convince some consumers that its iPhone is the best choice. In markets like India, Apple relies on its older iPhones to drive sales. Back in January it relaunched the iPhone 4 at a cost of about $245. But Xiaomi is taking India head on and just launched its former flagship device, the Mi 3, for a cost of $250. Even with Apple's clout, a newer Xiaomi device with better specs may be hard to pass up. So if Chinese consumers are any indicator, Apple's growing China problem may spill into other markets as well.

Leaked: Apple's next smart device (warning, it may shock you)
Apple recently recruited a secret-development "dream team" to guarantee its newest smart device was kept hidden from the public for as long as possible. But the secret is out, and some early viewers are claiming its everyday impact could trump the iPod, iPhone, and the iPad. In fact, ABI Research predicts 485 million of this type of device will be sold per year. But one small company makes Apple's gadget possible. And its stock price has nearly unlimited room to run for early in-the-know investors. To be one of them, and see Apple's newest smart gizmo, just click here!


Chris Neiger has no position in any stocks mentioned. The Motley Fool recommends Apple. The Motley Fool owns shares of Apple. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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