Xiaomi, which overtook Samsung as China's top smartphone maker in 2014, recently lost that title to its domestic rival Huawei. IDC reports that Xiaomi's shipments in China fell 38% annually to 10.5 million during the second quarter, and that its market share declined from 16.1% to 9.5%. During the same period, Huawei's shipments rose 15% to 19.1 million, while its market share grew from 15.6% to 17.2%.
Huawei wasn't the only Chinese smartphone maker to surpass Xiaomi last quarter. Oppo's shipments surged 124% to 18 million, which boosted its share from 7.6% to 16.2%. Vivo's shipments jumped 75% to 14.7 million, helping it claim 13.2% of the market.
Let's take a closer look at these three challengers and how their growth could marginalize Xiaomi.
Ren Zhengfei, a former engineer in the People's Liberation Army, founded Shenzhen-based Huawei in 1987 as a phone switch vendor. But over the past three decades, Huawei expanded into telecommunications equipment, consulting services and equipment for enterprise customers, and mobile devices.
Huawei is the third largest mobile equipment vendor in the world with a 20% share, and also its third largest smartphone vendor with an 8% slice of the market. Huawei's revenue rose 37% to 395 billion yuan ($59.6 billion) last year as its net profit grew 33% to 36.9 billion yuan ($5.8 billion). Much of that growth was fueled by its consumer device business, which sells smartphones and tablets. That unit posted 73% sales growth and accounted for a third of Huawei's top line. Huawei also has a growing presence in Western markets, and it created Alphabet's (NASDAQ:GOOG) (NASDAQ:GOOGL) well-received Nexus 6P flagship phone.
Huawei's new P9 is a 5.5" flagship device that stands out from the competition with a dual-lens camera co-developed with German optics and camera maker Leica. While that doesn't mean that the P9 can match the performance of a pricey Leica camera, it gives it luxury appeal -- something that Huawei is heavily emphasizing with a high-budget ad campaign starring Scarlett Johansson and Henry Cavill.
Tony Chen founded Oppo in 2001. The Dongguan-based company initially manufactured MP3 and MP4 players before pivoting toward mobile devices. Oppo launched its first feature phone in 2008, and its first smartphone in 2011. It first established an overseas presence in Thailand, then throughout Asia, the Middle East, and Africa -- resulting in nearly 20% of its sales coming from outside of China in 2015. Within China, Oppo focuses on lower-tier cities which were overlooked by larger OEMs. Xiaomi, by comparison, still generates about 90% of its sales from China.
Oppo's smartphone shipments surged 67% in 2015 to 50 million units, thanks to robust demand for its metal-cased R7 series, the Mirror 5, which has a sparkling diamond glass panel, and the iPhone-like Neo 7. By comparison, Xiaomi's shipments rose just 15% to 70 million.
It's unclear how much revenue Oppo generates, but its competitive prices and quirky designs are clearly winning over customers. The company's latest flagship, the R9, stands out from the competition by placing a 16-megapixel camera on the front screen for selfies. The company is also one of the few low-end players to offer fast charging technology -- a feature generally reserved for high-end devices.
Vivo, which is also based in Dongguan, was founded in 2009 by Shen Wei as a subsidiary of BBK Electronics. Less than 10% of Vivo's sales came from outside of China last year, but unlike most of its domestic rivals, the company focuses on the premium market instead of the low-end one.
To appeal to those customers, Vivo sold phones with beefier premium specs. Its X1 was the world's thinnest smartphone at 6.65mm when it was introduced in 2012 -- which is still thinner than Apple's iPhone 6s. The X1 was also the first to use a Hi-Fi audio chip developed by Cirrus Logic (NASDAQ:CRUS) for clearer audio. The Xplay 3s was the world's first 2K-resolution phone when it arrived in 2013, and its latest flagship, the Xplay 5 Elite, is the world's first smartphone with 6GB of RAM.
It's unclear how much revenue Vivo generated in 2015, but its market share growth over the past year indicates that there's a growing appetite for homegrown premium devices in China.
Xiaomi isn't the only company that should worry
The rise of Huawei, Oppo, and Vivo is bad news for Xiaomi, but it's even worse news for Apple (NASDAQ:AAPL) and Samsung. Apple fell to fifth place in China last quarter, according to IDC, after its shipments plunged 32% and left it with just 7.8% of the market. Samsung was bumped off the top five into the "others" category. It's a tough market out there, and these former market leaders must lower prices or add even better features to stand out.