News
The smartphone maker sees an opportunity to expand their business with domestic rival Huawei struggling from oversees pressure
Today, reports suggest that Chinese smartphone maker Xiaomi is poised to sell 1 billion shares in an effort to raise $3.2 billion, with a further $855 million to be generated from a seven-year, zero-coupon convertible bond.
In total, the company is aiming to raise around $4 billion to expand its operations, particularly in order to capitalise on the continuous international pressure of their domestic rival Huawei.
This new war-chest will be used primarily to “increase market share and [for] strategic ecosystem investments,” according to Bloomberg.
Analysts suggest that Xiaomi is one of the main beneficiaries from the US government’s ongoing battle with Huawei, with the gain in market share already realised seeing them overtake Apple as the world’s third largest vendor in terms of shipments.
Indeed, Xiaomi has already been benefiting from the US sanctions placed on Huawei throughout the year, gaining significantly in foreign markets in Europe, as well as in India. Just last week the company announced record-breaking revenue and profit from Q3, reporting a 45% increase in shipments year-on-year. By contrast, Huawei saw a 24% drop in the same period.
Xiaomi’s share price has climbed 146% from a year ago.
In a sense, Xiaomi is comfortably stepping into Huawei’s shoes in numerous international markets, but whether it can build on this success to take on the likes of Apple and Samsung remains to be seen. For one thing, the company will need to release a premium mobile device that can rival that of their rivals – something which Xiaomi has been lacking in recent years.
It will also depend on Huawei’s ability to bounce back from the political crisis it finds itself embroiled in. If the Biden administration serves to smooth over relations with Huawei, the latter could soon be back in fighting form to do battle for its lost market share. We should not forget that Huawei’s R&D budget is simply enormous and, despite recent successes, Xiaomi will struggle to keep the pace if the pressure on Huawei is substantially relieved in recent years.
So far, 2020 has seen Xiaomi in the right place at the right time and the company will hope to be just as prescient as we enter 2021. This cash injection should go some way to facilitating that.
Also in the news:
