Xiaomi unseats Samsung to gain China’s smartphone throne in Q2

Xiaomi Inc took China's smartphone crown in the second quarter after the Beijing-based firm replaced Samsung Electronics Co Ltd as China's largest smartphone vendor, according to data from Canalys.

Xiaomi shipped just under 15 million units in the three months ended June, while Samsung's 13.2 million unit shipments just beat China's Lenovo Group by around 200,000 units to take second place, said Canalys.

The three-year old Xiaomi, which closely apes many aspects of Apple Inc and its designs, also nabbed fifth place by global market share for smartphone makers in the second quarter, research firm Strategy Analytics said.

But Canalys' data also shows that Xiaomi is still almost entirely dependent on its home market in China. Only about 100,000 smartphone units were shipped outside of China and the jury is still out on whether it can replicate its domestic success overseas.

The company is already setting up shop elsewhere in Asia in Malaysia, Singapore and the Philippines. In India, where Xiaomi launched the Mi3 model in July, the company saw more than 100,000 people pre-register for a supply of 10,000 units.

Xiaomi is also looking to expand into other markets like Brazil, Indonesia and Thailand with the help of Hugo Barra, the former vice president of the Android mobile operating system for Google Inc who is now Xiaomi's international vice president.

"I'm quite optimistic," said Sameer Singh, a Hyderabad-based analyst who writes about technology at tech-thoughts.net.

"They do have a problem right now, but it seems to be a supply problem more than anything else," Singh said.

"Right now, international demand far outweighs supply. That could potentially make interested customers defect to other offerings," he said.

Xiaomi's critics have also lambasted the firm for infringing on intellectual property rights. This includes using the logo from Apple's Aperture application on a picture of one of its phones.

The Chinese company, hailing from a market known for lax attitudes towards intellectual property, also saw its reputation tarred when people found that it had passed off copyrighted images as its own.

The original photographs were taken from places like National Geographic and Flickr, and passed off as images taken with Xiaomi's smartphone camera.

The de-crowned Samsung is faced with more challenges than just falling sales in China. The South Korean smartphone maker said on Tuesday that it will do 30 percent less business with a parts supplier after uncovering the employment of child workers at the China-based firm.

In July, Samsung Electronics suspended business with Dongguan Shinyang Electronics Co Ltd, a wholly owned subsidiary of Kosdaq-listed Shinyang Engineering Co Ltd, after US-based China Labor Watch said it found at least five child workers without contracts at the Guangdong Province-based supplier.

Samsung said Chinese authorities found that while Dongguan Shinyang did not directly employ child workers, a subcontractor had hired them through a labor agency.

In 2012, the same activist group said seven children younger than 16 were working for one of the South Korean firm's China-based suppliers. Chinese law forbids hiring workers under 16.