For the past few years we Apple watchers have been treated to a daily beating from the technorati elite, market prognosticators, and media gurus of how Apple is doomed because every smartphone and tablet maker sells cheaper products.
Last year’s darling of the industry was Samsung. This year Samsung’s profits have collapsed at the hands of yet another, newer darling of the industry, Xiaomi, a four-year-old company from China which blatantly steals designs from Apple, and sells the cheapest of cheap smartphones and tablets, mostly in India and China.
Xiaomi is a private company that is growing quickly, valued by some at $10-billion (vs. Apple at about $640-billion), but has yet to provide a return on investment or a profit of substance. In fact, last year Xiaomi recorded a meager $56-million profit. That’s about one-third of what Apple earned in a single day.
Doesn’t that make Xiaomi much like Amazon? A rapid growth company that’s intent on spending investor money to push market share, but doesn’t have a plan in the works for profits or long term sustainability. The Apple critic conglomerate puts up Xiaomi as the example of a company that, David and Goliath style, will fell the Cupertino giant. In a year or two. Soon. Someday. When the company leaves China for the rest of the world. Any day now. Just wait. You’ll see.
That sounds much like the excuses we’ve all heard about Amazon through the years.
Meanwhile, Xiaomi now is banned in India for theft of intellectual property, so that’s likely to put a dent in the company’s world domination plans, which, oddly enough, don’t seem to include countries with tougher intellectual property laws.
Here’s the problem when the technorati elite, market prognosticators, and media gurus push cheap knockoff manufacturers to a higher-than-earned profile in the smartphone and tablet industry. They never really make it to the top. Just like Amazon never became anything more than a big online bully, a huge retailer that sells everything, but nothing at a profit. Just like Amazon, Xiaomi’s business model is only sustainable as long as there are investors willing to prop it up. The business model of cheap at any expense is not sustainable under its own weight.
In the U.S. it’s been Wall Street that both pushed and propped up Amazon. For Xiaomi, a single investor owns nearly over 75-percent of the company, an owner obviously hoping that marketshare growth will result in a sweet buyout offer from a major industry competitor a few years down the road.
Meanwhile, whether it’s personal computers, smartphones, tablets, applications, or retail outlets, Apple retains the marketshare lead in the only category that matters. Profit.