Apple's Growth Trails Smartphone Market in 3Q 2013, but Improves in Broader Mobile Phone Market

[SlCKB0Y]

Its an interesting formula, selling to cheap phones for at or below cost. You lose money on every transaction but I guess the hope is to make up the profit on volume.

Except if you are selling "at or below cost" how do you ever end up making a profit, regardless of volume?

----------

They're pretty big around the world. IIRC the US government publicly stated they didn't trust them as they were basically funded by the Chinese government. It turned out that funding was part of some sort of business grant. Some numpty figured it meant that all the phones would be spying.

They are actually concerned about the telecom gear that the company makes (not so much the phones) and the intelligence organisations of most western countries have conducted detailed studies in the potential risks and almost all of them have advised against using their gear due to the very close ties the company has to the Chinese government. I reckon I might put more faith in their assessment, than of yours for some reason.

http://en.wikipedia.org/wiki/Huawei#Security_concerns

 

[Max(IT)]

It's just business, nothing's fair. The Nexus 5 is specifically designed for both the general public and developers. That speaks to the terrific advantages of Googles good intentions and proof that they are giving good deals to the customers.

It may be hard for some to comprehend since Apples prices are so high, but people including myself will part with an excess amount of money because we want Apples product.

I use and enjoy Android & Apple. In lieu of an iPhone that appeals to me this year I bought a Galaxy Note 3, and will be buying a Nexus 5. I like the variety & choices in the market place.

I really don't know how someone saying "I like iPhone and apple products" could buy a Samsung Note 3, a device (can't define it a smartphone, sorry ...) designed and assembled with a totally different philosophy .....

 

[macred]

I really don't know how someone saying "I like iPhone and apple products" could buy a Samsung Note 3, a device (can't define it a smartphone, sorry ...) designed and assembled with a totally different philosophy .....

I'm open minded and enjoy variety, it's as simple as that. I like the experience of using a product & judging for myself, not relying on reports made up by those who may have never used the product they choose to hate

 

[springsup]

I'll probably buy one and I'm not a developer. I know a good deal when I see one.

Btw, Google offers search, mail, and Android for "zero-margin" and they are scaling just fine. Advertising is a very scalable business model.

Those things you mentioned are all zero-fee, but not zero-margin. Zero margin means you don't make a profit, whereas Google do make lots of profit from those businesses.

Google don't make a profit from the Nexus devices, which is why they're roughly half the cost of similar devices. LG might make a small profit, but given the price and the specs it would be very, very small. Nowhere near as profitable as selling their own devices.

That's why it's not scalable. If everybody adopted this strategy and nobody made a profit on smartphone hardware, innovation in that segment would stop (or so capitalists would have us believe, but that's a story for another day)

 

[EbookReader]

Comparing to the Nexus devices isn't fair. IIRC, Nexus devices are sold at cost (i.e. zero-margin). That's not a scalable business model for anybody.

The Nexus program is really meant for developers and OEMs, not for the general consumer.

It's not zero margin.

Hypothetical:

It costs LG $210 to make the Nexus 5. About the same price it cost to make the iphone.
LG sells it to Google at $260 for a profit of $50.
Google sell it at $349. Let's assume that the $89 will allow Google to do these things: Marketing, returns, warranty, customer service, call center, warehouse, shipping from LG to Google etc...

LG: $50 profit
Google: break-even/small profit / Google Play service profit
Customers: high end smartphones at low costs.

Win for LG. Win for Google. Win for Customers.




-----------------

Xiaomi is profitable selling high end smartphones at half the prices when compare to Iphone/GalaxyS4 in China.

$327 unlocked/off-contract in China for this high end smartphone. It has better specs than even the Nexus 5.

Qualcomm Snapdragon 800 quad-core 2.3GHz CPU
Sharp/LG 5″ 1080P IPS display with ultra-sensitive touch
2GB LPDDR3 RAM
16GB eMMC4.5 flash memory
SONY 13 MP Exmor RS CMOS back camera
2MP BSI front camera
NFC & 2.4/5G WiFi support
3050 mAh battery

And Xiaomi smartphone is outselling Apple smartphone in China.

There is profits to be made selling high end smartphones at thin profit margin. Xiaomi has proved it. And its current $10 billion valuation is higher than Nokia and Blackberry combined.

Not bad for a 3 years old company that sold its first smartphone less than 2 years ago.

 

[Nale72]

I really don't know how someone saying "I like iPhone and apple products" could buy a Samsung Note 3, a device (can't define it a smartphone, sorry ...) designed and assembled with a totally different philosophy .....

I can't understand why someone who like iPhone and Apple products shouldn't be able to appreciate Android/Samsung products also. I do and appreciate the advantages of both sides. Why this need to hate/throw crap at Samsung/Android just because you like Apple/iOS (or the other way around)?

Talking about the Note 3, I think that many Note 3 (or older Notes for that sake) users that also are or earlier used to be iPhone users whould have stayed with iPhone/iOS/Apple if they had offered a phone/phablet as well. But Apple have chosen to not go there.

I've taken my time to explore both worlds and appreciate both. I like some things better on Android phones and some better on iPhones. At the moment I have an iPhone 5 as my main phone. However that doesn't necessary equal I will stay with an iPhone when I change phone the next time. Maybe it will be a Nokia Lumia with Windows OS next time. To be "free" I use googles mail, calendar and contacts, which I can use on all mobile OS platforms.

Going back to the growth question I believe it's impossible to keep up with the others when it comes to total growth if you don't offer devices to all customers. Apple have chosen not to offer phones in the low end and phablet segments. Apple is obviously more eager to have as high margins as possible and getting as much money as possible out of their users then to give all users what they want.

I can understand that and it's nothing strange with just thinking about your own wallet. But as a user, I would like them to offer a wider range of phones. I belive that would lead to better growth and a higher profit in total (more money in their wallets), but certainly at a lower margin than their current. And as long as Apple seems to be more worried about margins than total profit, I don't think that's going to change.

IMHO that is...

 

[Nale72]

Who's right ? No one is going to line all the night to buy the latest Samsung flagship, so I have a good idea of who's right ...

They don't have to because they know they can go to the store and get one without staying in a line all night to be able to get one on launch day since Samsung (and most other brands) see to that there are enough phones available in the stores when they launch them.

I'm not saying this is wrong by Apple since it obviously work out well for them since thay have a pretty fanatic custumer base that will do anything to get their iPhone first of all and they know what's needed.

Apple have been extremely successful in locking users into their eco system and many Apple users seems almost fanatic in their love for Apple products and dismay for other brands. I don't know of any other customer group that are so true to their supplier.

I guess you have to applaud Apple for this accomplishment, but I will do my best to stay objective and not lock myself into any eco system. I like my Iphone but try to stay objective and still appreciate much in Android. Unlike many others, I don't see anything wrong in that.

 

[Oletros]

I really don't know how someone saying "I like iPhone and apple products" could buy a Samsung Note 3, a device (can't define it a smartphone, sorry ...) designed and assembled with a totally different philosophy .....

Perhaps because the world is not black and white and it is not "with me or against me" and people can like different things on different devices

----------

It's more than relevant: Apple don't want to be Samsung. Apple has different target and a totally different strategy. Apple just don't wanton to flood the market with a range of phones of any type, size and price, most of them trashware.
Who's right ? No one is going to line all the night to buy the latest Samsung flagship, so I have a good idea of who's right ...

Samsung has sold 40 million Galaxy S4 in the 6 months. 20 millions per quarter of the flagship device and not counting the Galaxy Note models.

Tell me now what they only sell to different target

 

[paysdoufs]

The mere fact that Samsung is putting better technology in to customers' hands for cheaper is changing the world.

I don't expect Apple to come up with the cheapest smartphone, but they can afford to lower their margins and hence prices. If they made the 5C $100 cheaper, some Chinese company may well come along and produce a cheaper clone, but that doesn't matter.

The world is not split in to "people who buy the very cheapest smartphone" and "people for whom cost is no issue". Given the current competitive state of the market, the iPhone is quite simply overpriced.

The reason for that is that iPhone prices were set at a time when the competitive landscape was overwhelmingly in Apple's favour. That's no longer the case; Google have made up significant ground and Apple hasn't managed to keep their very large lead.

I still think iPhones are the best smartphones on the market, but the question is whether or not they're better enough to justify their much higher price. The iPhone App ecosystem is definitely better, but the same was true of Mac once (remember when Adobe Photoshop was a Mac exclusive?).

Thanks. That's an extremely sensible post. Just sad that so many fanboys here refuse to see the changes going on in the worldwide smartphone market (or believe that their little WASP suburban neighborhood is the only relevant market...)

For those thinking that Apple will be fine being the Mercedes of smartphones: Do some background research on MB -> Shrinking market share, less buying power with suppliers, craving for an enlarged customer base, obliged to collaborate with not-so-posh manufacturers to keep at least some traction in the high-volume market, and a CEO in the hot-seat (And to those that point out to BMW: They are not a fully publicly owned company; so there's less pressure for them).

 

[BaldiMac]

There is money to be had at selling high end smartphone at low profit margin.

Than why isn't any of the top manufacturers other than Samsung and Apple (who are having success at the high end) making any money?
http://www.businessinsider.com/smartphone-industry-profit-share-2013-7

It's not zero margin.

Hypothetical:

It costs LG $210 to make the Nexus 5. About the same price it cost to make the iphone.
LG sells it to Google at $260 for a profit of $50.
Google sell it at $349. Let's assume that the $89 will allow Google to do these things: Marketing, returns, warranty, customer service, call center, warehouse, shipping from LG to Google etc...

LG: $50 profit
Google: break-even/small profit / Google Play service profit
Customers: high end smartphones at low costs.

Win for LG. Win for Google. Win for Customers.

Funny how it all works out when you make up numbers.

"LG's mobile business grew, selling 12 million devices over the quarter for $2.75 billion in revenue. The division saw a loss for the quarter of $75.3 million, due in large part to an "increase in marketing expense" for its G2 smartphone. Additionally, LG has seen growing competition in the smartphone segment as others have lowered prices and rolled out other devices."
http://www.electronista.com/article...on.tv.competition.g2.marketing/#ixzz2jDCfNNYV

There is profits to be made selling high end smartphones at thin profit margin. Xiaomi has proved it.

They proved it by making unspecified profits for one quarter supplemented by software and services after 3 years of losses? Sounds more like a hypothesis than proof.

 

[Dmunjal]

Perhaps because the world is not black and white and it is not "with me or against me" and people can like different things on different devices

----------



Samsung has sold 40 million Galaxy S4 in the 6 months. 20 millions per quarter of the flagship device and not counting the Galaxy Note models.

Tell me now what they only sell to different target

And 5 million Note 3s in first month.

http://www.androidcentral.com/jk-shin-5-million-galaxy-note-3s-shipped-first-month

 

[tongxinshe]

Source that usage statistics only favor iPhone because of US focus?

The simple fact and the simple logics. Everyone can easily check what websites are involved in the statistics, and the iPhone market share difference between the US and the Europe / Asia is well known.

US iPhone market share is around 40%, so I don't see how that helps your theory. I've never seen iPhone usage share under 50%.

I agree that iOS users on average use their devices more than Android devices, so the fact of 80% usage vs. >40% market share does make sense. What I tried to point out is that it is self-cheating to expect 13% of the users actually making up >80% of internet usage. A 25% internet usage would be more realistic given iPhone’s global market share.

 

[Dmunjal]

The simple fact and the simple logics. Everyone can easily check what websites are involved in the statistics, and the iPhone market share difference between the US and the Europe / Asia is well known.



I agree that iOS users on average use their devices more than Android devices, so the fact of 80% usage vs. >40% market share does make sense. What I tried to point out is that it is self-cheating to expect 13% of the users actually making up >80% of internet usage. A 25% internet usage would be more realistic given iPhone’s global market share.

How is this measured? Web servers with user agents? Isn't Netflix something like 35% of all Internet traffic? Did they also measure Netflix servers? So many flaws with this data.

 

[Max(IT)]

I'm open minded and enjoy variety, it's as simple as that. I like the experience of using a product & judging for myself, not relying on reports made up by those who may have never used the product they choose to hate

Dude in my home there is a galaxy S3 and a galaxy S3 Mini, and a Lenovo android tablet .... I was one of the early adopter of android, several years ago.

If I do prefer Apple (as I actually do) is after a deep process of analysis ....

----------

They don't have to because they know they can go to the store and get one without staying in a line all night to be able to get one on launch day since Samsung (and most other brands) see to that there are enough phones available in the stores when they launch them.

I'm not saying this is wrong by Apple since it obviously work out well for them since thay have a pretty fanatic custumer base that will do anything to get their iPhone first of all and they know what's needed.

Apple have been extremely successful in locking users into their eco system and many Apple users seems almost fanatic in their love for Apple products and dismay for other brands. I don't know of any other customer group that are so true to their supplier.

I guess you have to applaud Apple for this accomplishment, but I will do my best to stay objective and not lock myself into any eco system. I like my Iphone but try to stay objective and still appreciate much in Android. Unlike many others, I don't see anything wrong in that.

In this exact moment my iPad is tethered at a Lumia 620 WP8 ....
As I said above, I'm not close minded at all ...

 

[BaldiMac]

The simple fact and the simple logics. Everyone can easily check what websites are involved in the statistics, and the iPhone market share difference between the US and the Europe / Asia is well known.

There is no simple fact and simple logic in your claim. Provide sources such as links to methodology or you are simply making it up.

I agree that iOS users on average use their devices more than Android devices, so the fact of 80% usage vs. >40% market share does make sense. What I tried to point out is that it is self-cheating to expect 13% of the users actually making up >80% of internet usage. A 25% internet usage would be more realistic given iPhone’s global market share.

But again, you just made all those numbers up. The iPhone is not 13% of users. The iPhone had 13% market share last quarter. User base is north of 25%.

----------

How is this measured? Web servers with user agents? Isn't Netflix something like 35% of all Internet traffic? Did they also measure Netflix servers? So many flaws with this data.

So, just to be clear, you are claiming flaw with data that was never actually specified. That's pretty impressive!

 

[gctwnl]

Because with that strategy, you will eventually OWN the market.

Not if the market is 'Android'. You cannot create a monopoly (like Microsoft did by going cheap when the IBM PC was launched (DOS was $500, the two competitors were $1000). It was a sharp insight from Bill Gates that computers would become affordable and thus a high-volume market) with Android. You can never get monopoly pricing because you do not own the ecosystem. The Android based smartphone providers are in the same position as the hardware providers in the Wintel monopoly.

And for those who compare Apple's position now with the late 80's because they are making profits. The point is not 'do they make profits', the point is 'do they keep innovating'. It might not seem a spectacular innovation, from iPad 4 to iPad Air, but 30% smaller, much lighter, comparable to more battery life, much more power and all at the same price is extremely innovative.

There are many types of innovation. Coming up with something new at the start of the S-curve is obvious (but often only one in many succeeds at that stage), successfully growing is another, etc.

The IC was invented in the US (very innovative, very visible). But the Japanese were the most successful using ICs instead of loose components in consumer audio (and owned that market, destroying the US manufacturers). And while in the US people were still sending each other paper checks, the Dutch had used computers to completely digitise major payments (nobody got a pay 'check' anymore). Their are more types of innovation than the 'new category' type.

As long as Apple is innovating enough, be it new product categories (risky, but very rewarding if it succeeds) or improving services or improving cost/benefit for the consumer, the comparison with the 90's does not hold. The problem then was not their profits. The problem then was a lack of meaningful innovation.

 

[EbookReader]

Than why isn't any of the top manufacturers other than Samsung and Apple (who are having success at the high end) making any money?
http://www.businessinsider.com/smartphone-industry-profit-share-2013-7




Funny how it all works out when you make up numbers.

"LG's mobile business grew, selling 12 million devices over the quarter for $2.75 billion in revenue. The division saw a loss for the quarter of $75.3 million, due in large part to an "increase in marketing expense" for its G2 smartphone. Additionally, LG has seen growing competition in the smartphone segment as others have lowered prices and rolled out other devices."
http://www.electronista.com/article...on.tv.competition.g2.marketing/#ixzz2jDCfNNYV

LG Mobile business has been profitable. The loss is attributed to the marketing expense of the G2.

And Nexus 4 is just a small part of LG mobile, which isn't in the "high volume, thin profit" smartphone business. Neither is Samsung, Sony, HTC or Apple.

But Xiaomi is and the "high volume, thin profits" strategy is wildly successful for this Chinese start-up.

They proved it by making unspecified profits for one quarter supplemented by software and services after 3 years of losses? Sounds more like a hypothesis than proof.

That's the mark of a successful start-up. I don't think anybody expect a start-up to be profitable straight from year 1.

Xiaomi is now profitable.
Xiaomi is now valued at $10 billion (up from $4 billion valuation last year). $10 billion is more than Nokia and Blackberry combined.

How is that not successful? It is one of the most successful start-ups of all time.

This company that sold its first smartphone less than 2 years ago is now OUTSELLING Apple in the world's biggest smartphone market.

 

[Michael Goff]

How come samsung's phones are never in such tight supply? Considering they're selling a lot more than apple.

Samsung makes everything of theirs, pretty much. Apple doesn't actually make a single piece of their products. They're industrial designers.

 

[EbookReader]

http://online.wsj.com/news/articles/SB10001424052702304441404579120901140934562
How Upstart Xiaomi Rattled China's Smartphone Race
Low-Price Device Maker Undercuts Apple in Competitive Market

Better specs at less than half the price = WIN for consumers

 

[tongxinshe]

There is no simple fact and simple logic in your claim. Provide sources such as links to methodology or you are simply making it up.

You quote my whole sentence and fail to read the second half of it (where the fact and the logic being elaborated)? What a good habit!!!!!!

But again, you just made all those numbers up. The iPhone is not 13% of users. The iPhone had 13% market share last quarter. User base is north of 25%.

hahahaha, how did you get that >25% estimate?! By counting the people around you? I assume you are in the United States. KEEP IN MIND, the US is very different from the rest of the world in almost every aspect of the life!!

 

[BaldiMac]

LG Mobile business has been profitable.

Source?

This company that sold its first smartphone less than 2 years ago is now OUTSELLING Apple in the world's biggest smartphone market.

Yep. But again, not proof of your claim. The problem with a business plan based on price, is that you are competing based on price. Where is the long term viability of this strategy?

You quote my whole sentence and fail to read the second half of it (where the fact and the logic being elaborated)? What a good habit!!!!!!

I read your whole post and simply pointed out that you did not provide any facts or logic. You simply made a generalization without referencing any particular statistics or methodology. I'm sure there is some web usage statistics that are biased toward the US.

But there are dozens of internet usage statistics that you can look at. All with differing focus and methodologies. Dismissing them all with an unsupported generalization is just silly.

hahahaha, how did you get that >25% estimate?! By counting the people around you? I assume you are in the United States. KEEP IN MIND, the US is very different from the rest of the world in almost every aspect of the life!!

Math. Total iPhones sold vs total Android phones sold. My very rough estimate was based on 400 million iPhones and 1 billion Android phones. What's funny about that?

 

[tongxinshe]

I read your whole post and simply pointed out that you did not provide any facts or logic. You simply made a generalization without referencing any particular statistics or methodology. I'm sure there is some web usage statistics that are biased toward the US.

But there are dozens of internet usage statistics that you can look at. All with differing focus and methodologies. Dismissing them all with an unsupported generalization is just silly.

We are talking about the statistics quoted by the original post of this thread, which says iPhone’s internet usage is 80%, not any others.

Math. Total iPhones sold vs total Android phones sold. My very rough estimate was based on 400 million iPhones and 1 billion Android phones. What's funny about that?

Firstly, total iPhone sales haven’t really reached 400 million, yet, while total Android phone sales have well passed 1 billion. Secondly, 1/3 of those iPhones are old enough and fully retired, while at the same time most of the Android sales are in the last 2-3 years and still in use. If you count smartphone total sales back all the way to 6 years ago, you would have to include all of the blackberry phones of the old days. The last, if you use the total sales data as your base, you cannot fully ignore the Windows phone and Blackberry phone sales in the last 2-3 years, either.

I agree you made some point in this method, so a better estimate of iPhone’s current market share is higher than 13%, but it won’t be anywhere near 20%, since iPhone’s sales percentage has been always well under 20% in the last 2 years, which is the period matters most.

 

[EbookReader]

Source?

http://www.gsmarena.com/lg_q2_2013_sales_results_are_out_sales_and_profit_up_from_q1-news-6450.php

The Mobile Communications division of the company has posted a profit of $54.77 million from $2.78 billion in sales. That's a 2.7% fall quarter-over-quarter, but a huge 34.5% jump from Q2 2012.

LG sold a total of 12.1 million smartphones - over two times more than it managed to sell for the same period last year and 17% more than the last quarter. The boost was helped by strong sales of L-series II and F-series smartphones.

Yep. But again, not proof of your claim. The problem with a business plan based on price, is that you are competing based on price. Where is the long term viability of this strategy?

Xiaomi is an example of a successful smartphone company that utilizing the "high volume, thin profit" model. They are gaining market share by competing based on price.

You doubt their long term viability. I don't. I think they have a very bright future. And judging by their valuation, investors think so too.

http://www.reuters.com/article/2012/06/05/us-xiaomi-fundraising-idUSBRE8540UB20120605
$4 billion valuation in June 2012

http://www.bloomberg.com/news/2013-08-23/xiaomi-director-says-valuation-reaches-10-billion.html
$10 billion valuation in August 2013


2012 shipments: 7.9 smartphones
2013 shipments: expecting 20 million smartphones

It's a smart strategy on their part. They can sell it at a premium / high profit but their market share would be very tiny. Or they can go for high volume and sell high end smartphone at thin profit. Their ultimate aim is to be the biggest smartphone seller in the world's biggest smartphone market. Will they overtake Samsung in China in 5 years time? Probably not. But they have a very good chance at being among the top 3 sellers in China.

Thus far, their strategy has paid off. Xiaomi is now selling more smartphone than Apple in China. How is that not successful for this start-up?

Source:
http://business.time.com/2013/10/14/xiaomi-chinas-threat-to-apple-and-samsung/#ixzz2jORp0VTd
China’s Xiaomi Poses Threat to Smartphone Giants Apple and Samsung
Why Xiaomi should worry Apple, Samsung and others

 

[EbookReader]

http://thenextweb.com/mobile/2013/1...ents-81-3-q3-2013-ios-13-4-windows-phone-4-1/

Blackberry is sinking. The "Others" has sank.

Look like it will be Android, iOS and Windows....Will Android have 85% of the smartphone market share in 3 years time?

Android 85% ?
iOS 8% ?
Windows 7% ?

 

[BaldiMac]

We are talking about the statistics quoted by the original post of this thread, which says iPhone’s internet usage is 80%, not any others.

The original post of this thread doesn't say that at all.

Firstly, total iPhone sales haven’t really reached 400 million, yet,

421 million as of the end of Q3 2013.

while total Android phone sales have well passed 1 billion.

Okay. 1.1 billion doesn't change my statement. That's still over 25%.

Secondly, 1/3 of those iPhones are old enough and fully retired, while at the same time most of the Android sales are in the last 2-3 years and still in use. If you count smartphone total sales back all the way to 6 years ago, you would have to include all of the blackberry phones of the old days.

Instead of making up numbers, you could use real ones. 387 million iPhones were sold in the last three years. A little over a billion Android phones. Again, doesn't change my claim that user base is over 25% iPhones.

And, of course, the logical assumption would be that the low cost Android phones are in use for less time on average.

The last, if you use the total sales data as your base, you cannot fully ignore the Windows phone and Blackberry phone sales in the last 2-3 years, either.

I was comparing iPhone to "Android" phones, since that was what we were talking about.

I agree you made some point in this method, so a better estimate of iPhone’s current market share is higher than 13%, but it won’t be anywhere near 20%, since iPhone’s sales percentage has been always well under 20% in the last 2 years, which is the period matters most.

Again, actual numbers would be more helpful than what you feel it should be.

http://www.gsmarena.com/lg_q2_2013_sales_results_are_out_sales_and_profit_up_from_q1-news-6450.php

The Mobile Communications division of the company has posted a profit of $54.77 million from $2.78 billion in sales. That's a 2.7% fall quarter-over-quarter, but a huge 34.5% jump from Q2 2012.

LG sold a total of 12.1 million smartphones - over two times more than it managed to sell for the same period last year and 17% more than the last quarter. The boost was helped by strong sales of L-series II and F-series smartphones.





Xiaomi is an example of a successful smartphone company that utilizing the "high volume, thin profit" model. They are gaining market share by competing based on price.

You doubt their long term viability. I don't. I think they have a very bright future. And judging by their valuation, investors think so too.

http://www.reuters.com/article/2012/06/05/us-xiaomi-fundraising-idUSBRE8540UB20120605
$4 billion valuation in June 2012

http://www.bloomberg.com/news/2013-08-23/xiaomi-director-says-valuation-reaches-10-billion.html
$10 billion valuation in August 2013


2012 shipments: 7.9 smartphones
2013 shipments: expecting 20 million smartphones

It's a smart strategy on their part. They can sell it at a premium / high profit but their market share would be very tiny. Or they can go for high volume and sell high end smartphone at thin profit. Their ultimate aim is to be the biggest smartphone seller in the world's biggest smartphone market. Will they overtake Samsung in China in 5 years time? Probably not. But they have a very good chance at being among the top 3 sellers in China.

Thus far, their strategy has paid off. Xiaomi is now selling more smartphone than Apple in China. How is that not successful for this start-up?

Source:
http://business.time.com/2013/10/14/xiaomi-chinas-threat-to-apple-and-samsung/#ixzz2jORp0VTd
China’s Xiaomi Poses Threat to Smartphone Giants Apple and Samsung
Why Xiaomi should worry Apple, Samsung and others

Wow. Again, nothing you posted proves your claim. Shipments and valuation don't prove consistent profitability of low margin hardware. Nor does a single quarter of unspecified profit supported by software and services revenue.