Xiaomi phone sales aren’t as disappointing as they seem

Struggling to keep up torrid pace

Xiaomi – often referred to as China's Apple – has revealed disappointing sales figures for the first half of the year, but analysts insisted the smartphone maker's growth wasn't grinding to a halt.

The company said on Thursday that it sold 34.7 million smartphones in first half of 2015. Analysts highlighted that if sales continued at this pace the company would easily miss its 80 million-100 million sales target for the year.

It comes as the company – which was recently valued at $45 billion –battles a number of external factors, such as the rise of smaller brands copying Xiaomi's model of selling low-cost phones with high specs.

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A second issue is a broader slowdown in the Chinese smartphone market, which contracted 4 percent year-on-year in the first quarter of 2015, according to IDC. This marked the first year-on-year contraction in six years.

In that environment, Xiaomi Lei Jun said the company had done well.

"Even with the China smartphone market slowing down, we did a stellar job of posting a 33 percent growth on last year's numbers. It can be said that we outperformed the market and produced an excellent report card," Lei said in a statement.

'Significant upside'

Analysts said it was "crucial" for Xiaomi to expand out of China for future growth, however.

"The potential to grow further in China is limited. They need to look at the emerging markets," Ben Wood, chief of research at CCS Insight, told CNBC by phone.

The company has pushed into India and this week announced the launch of some of its devices in Brazil -- the first country outside of Asia where Xiaomi devices will be sold.

"If you take Brazil and India there is a lot of volume potential there and if they can bring that online, there is significant upside for them," Wood said, adding that the 80 million-100 million sales target was still possible.


Xiaomi plans to continue its global expansion drive this year, but is currently not selling smartphones in the U.S. or Europe. However, it has been attempting to push its brand in Europe and America through an online store it opened earlier this year that sells accessories such as headphones.

The five-year-old start-up owes much of its success to the way it markets and sells its phones through its own online store. Xiaomi also has its own app store.

This ecosystem will give it a strong grounding as it continues to expand but also retain existing customers, analysts said.

"They have the business model in place where they are pushing the brand beyond phones," Roberta Cozza, mobile analyst at Gartner told CNBC by phone. "It's about what you can deliver in terms of apps and services and because of Xiaomi's Internet-based model, it's well placed to take advantage."