China's hottest startup is flatlining

Xiaomi smartphones lei jun ceo chinaEtienne Oliveau/Getty ImagesLei Jun, Chairman and CEO of Xiaomi Technology and Chairman of Kingsoft Corp talks to journalists before the 2nd plenary session of the National People’s Congress on March 9, 2016 in Beijing, China.

Xiaomi was once the most valuable tech startup in the world. Now it’s flatlining.

The Chinese smartphone and electronics company’s revenues barely grew in 2015, according to a new report from Fortune, as it struggles to grow its business globally amidst a slowdown in the Chinese smartphone market.

Xiaomi launched in 2010, and has enjoyed meteoric growth: By the end of 2014, it was the officially the world’s most valuable technology startup, with a private valuation of more than $46 billion. (It has since been eclipsed by Uber, and is currently #2.)

Specialising in cheap, high-quality smartphones, it grew off the back of an unusually passionate fanbase, which it was careful to cultivate; liberal borrowing from Apple’s playbook, including charismatic CEO keynotes; and a booming market in China for smartphones.

The company set itself an ambitious target for 2015: Sell 100 million smartphones. But by July 2015, as sales began to slow, it started to become clear that it just wouldn’t happen.

Ultimately, it sold “over 70 million,” according to a company spokesperson.

Fortune’s Scott Cendrowski now has the scoop on Xiaomi’s alleged revenue figures, and they don’t make pleasant reading for the company. (Xiaomi declined to comment on their authenticity to Fortune.)

  • Overall revenue for 2015 was 78 billion yuan ($11.9 billion), up 5% on 74.3 billion yuan ($11.3 billion) in 2014, well short of a 100 billion yuan target for the year.
  • Internet services revenue missed its target by an even wider margin — $560 million versus $1 billion predicted.

After years of double-digit growth, China’s smartphone market has now significantly cooled. In 2015, 434 million devices shipped, according to IDC — just 2.5% year-on-year growth. Xiaomi has launched elsewhere in other territories around the world, including in Latin America — but so far it has been unable to replicate the same runaway success that its home market was.

Xiaomi’s days as a rising star of the tech world may now be behind it: With its global ambitions muted by lack of growth, it’s now just another phone company.

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