Xiaomi loses $40 billion in just 18 months! What went wrong?

Xiaomi loss

Back in December 2014, the Chinese smartphone company Xiaomi announced a funding round of $1.1 billion at a valuation of $45 billion. Now, 18 months after Xiaomi’s latest funding round, the new analysis of company says it is worth less than $4 billion, which means a drop in the value by a whopping $40billion.The company’s smartphone sales are dropping day-by-day. Here, the question arises what made it lose 92% of its value in just 18 months?

On the other hand, the company’s smartphone sales are also dropping day-by-day, which has raised some serious questions about its future. Analysts are particularly curious to learn as to what made it lose 92% of its value in roughly eighteen months?

The reason behind the popularity of Xiaomi was its ability to develop high-quality smartphones with competitive hardware and software at a very low price than the other brands like Apple or Samsung.

Failure to enter global markets:

The company was confident that it would become an international brand if it launched its smartphones in the Western Europe and the United States.

But unfortunately, Xiaomi failed to enter the global markets mainly because it feared it would become the target of the lawsuits and the major companies like Apple and Samsung would accuse it of copying their hardware.

A decline in Chinese market:

The smartphone users in China have a habit of changing their smartphone brands every now and then. As soon as a brand comes with a more affordable smartphone, the Chinese customers quickly move to it. That is one of the reasons why Xiaomi had to try very hard to gain the attention of the Chinese clients.

According to a report released by research firm IDC, the sales of Xiaomi’s smartphones saw a decline of 40% in China during the second quarter of 2016.

Investments in hardware startups failed:

Despite being the fourth largest smartphone manufacturer in the world, Xiaomi has always been known as an Internet company. According to Xiaomi, the “Mi” in its name stands for “mobile internet”. In the future, it hopes to become an organisation that develops a wide range of products.

Although it seems an intelligent thought at a time when the international smartphone business is expected to see a decrease in the yearly sales growth, the bad part is that this company has been unable to get any successful outcome out of the investments it made in a number of hardware startups.

Will Xiaomi die?

The demand for its smartphones is decreasing and it is a very threatening circumstance for this company because it generates more than 80 percent of its income from smartphones business –  according to a report by CounterPoint Research. It is premature to predict its death since it is working on a range of new initiatives. For example, it is exploring new markets and ventures to attract more business. In the same bid, the company is expected to launch its smartphones in Pakistan and few other new markets.

Let’s see if it captures the attention of new markets like Pakistan, where there is enough excitement for the company’s smartphones.

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