Following US ban, Xiaomi unlikely to see sales decline

Following US ban, Xiaomi unlikely to see sales decline

A pedestrian walks past advertisements at a Xiaomi store in Hong Kong.
A pedestrian walks past advertisements at a Xiaomi store in Hong Kong.

The US ban on Xiaomi is unlikely to cause a swift dive for the Chinese smartphone maker's sales as long as the company is not deprived of Google Mobile Service (GMS) access, say IT industry pundits.

On Thursday, Xiaomi was among nine Chinese firms added to the Pentagon's list of companies with alleged ties to the Chinese military.

These companies will be subject to a new US investment ban that forces American investors to divest holdings of the blacklisted firms by Nov 11. A total of 44 Chinese companies have been listed so far.

A separate blacklist, known as the Entity List and issued by the US Department of Commerce, is seen as more severe because it prohibits US firms from supplying those entities without a licence. Xiaomi, which relies heavily on chips from US company Qualcomm, is not on this list.

Chinese smartphone maker Huawei was put on the Entity List in 2019 and has faced sluggish sales overseas, partly due to US restrictions blocking the company's access to GMS.

Whether Xiaomi will be added to the Entity List remains unclear.

"This move will not have an immediate impact on Xiaomi's sales in Thailand as the blacklist does not include a ban on Google services. However, it could affect some consumers' confidence," said Narathip Wirunechatapant, chief executive of IT retailer Jaymart Mobile.

If Xiaomi is banned from GMS in the future, the company could have about one year to consider what to do, similar to Huawei, he said. Existing products and some new handsets would still be able to access GMS.

If Huawei did not face a GMS ban, the company may have become the world's smartphone market leader because it was gaining broader acceptance for its product quality. Huawei's smartphone sales in Thailand fell sharply following the GMS ban.

As Xiaomi, which is a rising star in the smartphone segment, also ventures into the smart connected home appliance market with a broad ecosystem, the GMS ban may have less impact on the company, Mr Narathip said.

"Within 2-3 years, Chinese tech firms could develop smarter operating systems that could be broadly accepted," he said.

Teerit Paowan, an analyst at research firm IDC Thailand, said if a GMS ban is slapped on Xiaomi in the future, the company may shift its focus to ultra-low-end smartphones with prices below 4,000 baht, mainly for upcountry users. Huawei is focused on this segment now, he said.

According to IDC, Xiaomi replaced Apple in fifth position in Thailand's smartphone market share for the third quarter last year, driven by its focus on expanding channel partners in the offline segment.

SET-listed SiS Distribution Thailand, a distributor of Xiaomi products in Thailand, points out this ban merely targets US investment in Xiaomi and investors from other countries could step in to fill the void.

Somchai Sittichaisrichart, managing director of SiS, said if the GMS ban is eventually applied, Xiaomi's sales would "definitely drop" as customers have other choices.

If that is the case, dealers who may be interested in opening Mi Stores could hold back their investment because of business risks. Xiaomi contributed 10% of SiS's profit in 2020, he said.

Somyot Chaowalit, chief executive of JIB Computer Group, a major IT retailer, said there could be no impact on Xiaomi product sales in the short run, though it might affect user sentiment.

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