Xiaomi to triple European store count as Chinese smartphone makers double down on Europe

Forget the U.S. market: Chinese smartphone players are doubling down on Europe.

China's Xiaomi, the world's fifth-largest smartphone seller, told CNBC it plans to triple its store count in Western Europe by the end of 2019.

The company, which opened its first European location in Spain in 2017, said it hopes to operate more than 150 stores in the region by the end of the year, up from fewer than 50 at the end of 2018.

"It's a big big target for us," Xiaomi Senior Vice President Wang Xiang told CNBC's Tom Chitty on Sunday at Mobile World Congress in Barcelona.

Meanwhile Oppo, another Chinese company, announced earlier this month it will launch in three new regions in Europe, including the U.K. Oppo edged out Xiaomi to become the fourth-largest vendor of smartphones globally in the fourth quarter of 2018, according to market research firm IDC. Samsung, Huawei and Apple are the three biggest sellers by market share.

Chinese tech firms Huawei and ZTE are under intense scrutiny from the U.S. government out of fear their devices will enable spying from the Chinese government, leaving many Americans skeptical of Chinese brands. In response, companies like Huawei, Xiaomi and Oppo are buckling down on Europe.

"The political situation between Chinese companies and the U.S. government has benefited European consumers," Ben Stanton, senior analyst at research firm Canalys, noted in a recent report earlier this month. "The U.S. administration is causing Chinese companies to invest in Europe over the U.S."

Chinese companies like Xiaomi, Oppo, OnePlus and Huawei have expanded aggressively in Europe in recent years. Analysts say competitive prices and innovative features in the devices are increasingly appealing to European consumers, while Europe as a region has fewer barriers to entry than the U.S.

"The U.S. market is always attractive but the U.S. market also very different from others," Wang said. "The carrier plays a very important role there. You need to do a lot of customization."

The European strategy is paying off. Canalys found Xiaomi's European phone shipments surged 62 percent in the fourth quarter of 2018 compared to a year before, while Huawei's increased 56 percent. Shipments from Apple and Samsung both declined in that same period.

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Chinese companies have quickly gained market share by offering innovative, high-quality devices at a lower cost than their rivals. Bo Pi is chief technology officer at Goodix, a Chinese company that provides fingerprint sensor technology to smartphone makers including Huawei.

"The Chinese smartphone makers are much more aggressive," he told CNBC Monday at Mobile World Congress. "They're trying a whole new kind of format, a new technology."

Some analysts have even dubbed Xiaomi the "Apple of China." The company went public in Hong Kong last July at a valuation of $54 billion, but since then its share price has been roughly slashed in half. Concerns about slowing smartphone sales and the health of the Chinese economy have scared away many investors.

Xiaomi's Wang told CNBC he is not worried about the company's share price and is focusing instead on delivering innovative devices. Xiaomi teased a foldable phone on its Twitter account last month, but Wang said the company is still developing the device.

"We have a lot of work to do with it so we we're still working on it," he said.

Huawei unveiled a foldable phone at Mobile World Congress this week, rivaling Samsung's Galaxy Fold.

Correction: This story has been updated to reflect that Canalys reported Xiaomi's European phone shipments surged 62 percent in the fourth quarter of 2018, compared to a year before.

—CNBC's Tom Chitty contributed reporting.

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