It's no secret Xiaomi is one of the fastest growing smartphone makers right now. In the third quarter of this year it was the third-largest smartphone shipment vendor worldwide, falling short of only Apple (NASDAQ:AAPL) and Samsung (NASDAQOTH:SSNLF).

But Xiaomi's rise is about to get another boost, if a new round of funding, worth $1.5 billion, goes through.

Huge growth
The Financial Times recently reported Xiaomi is in talks to raise additional capital from the Russian Internet company, DST, and other investors. If Xiaomi gets the full $1.5 billion, it'll value the company at $40 billion.

That extra cash could go a long way in building a company that competes on a greater scale with Apple and Samsung. In the smartphone market right now, Xiaomi falls short of the two tech juggernauts, but it's making big gains.

Here's how the company's fared in worldwide shipments and market share in the most recent quarter ending in September:

 

Q3 2014
Shipments
(million)

Q3 2014

Market Share

Q3 2013
Shipments
(million)

Q3 2013
Market Share

Q3 2014 / Q3 2013 Change

Samsung

78.1

23.8%

85

32.5%

-8.2%

Apple

39.3

12%

33.8

12.9%

16.1%

Xiaomi

17.3

5.3%

5.6

2.1%

211.3%

Data Source: IDC.

In a recent press release IDC said Xiaomi's stellar growth came in its home country of China and surrounding markets but, "What remains to be seen is how quickly the company can move beyond its home territories to drive volumes higher."

And that's where the extra $1.5 billion comes in. Xiaomi is trying to expand its reach outside of China into new Asian markets, Latin America, and India. India is currently the third largest smartphone market and Xiaomi's low-cost (but high-end feel) phones could be just the type of devices consumers in the country want.

A recent report from Juniper Research notes that sales of smartphones under $150 will drive smartphone growth in emerging markets. That's good news for Xiaomi, whose cheapest phone goes for $99 in India. All the emerging market growth is expected to push worldwide smartphone shipments up 19% year over year in 2014, year over year.

But the most interesting part of Juniper's release was what it said about Xiaomi's effects on Apple and Samsung:

"While Apple and Samsung continue to dominate the Ultra-Premium end of the market, these vendors are facing significant pressure from local players in the emerging markets. For example, Xiaomi, the Chinese smartphone vendor, is witnessing tremendous success in China and India as a result of its aggressive price-point offerings. These new players are beginning to build market share and achieve larger economies of scale, which eventually will enable them to expand their offering and challenge other Smartphone sectors in the future."

Of course there's no immediate threat to Apple or Samsung's dominance from Xiaomi right now. But just as Juniper mentioned, as Xiaomi grows it could eventually take away market share from the two companies in countries where Samsung and Apple are on top.

Catching up quick
 
Apple's had plenty of success in India, selling older versions of the iPhone, but the average selling price for the device in the country is still about $450. That's a hefty price tag for many people in India, and it's much more expensive than Xiaomi's cheapest device. As Xiaomi expands into India and other countries, Apple will either have to adjust its selling prices, or risk losing sales to Xiaomi's cheaper but good-quality devices.

If Xiaomi secures the $1.5 billion in capital -- in addition to a $1 billion loan it secured last month -- it could propel the company's growth even faster and bring more even more competition to the increasingly crowded emerging markets.

 

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.