Xiaomi shipped over 70 million smartphones in 2015, falling short of their annual goal of 80 million unit shipments, while Huawei, who lagged behind by Xiaomi before 2015, announced 100 million annual shipments in December 2015.

Xiaomi’s poor performance in smartphone sales may have something to do with their inability to launch a fifth flagship phone in 2015, attributed to issues with Qualcomm’s new chipset. Despite that, the budget Xiaomi smartphone line, Red Mi, has far outsold their flagships.

The Red Mi line, launched two years after the first flagship, accounted for around 50% of the company’s total shipments in 2014. It’s estimated that the Red Mi line has accounted for 70% to 80% of Xiaomi’s total smartphone sales.

Xiaomi shipped over 1 million units in India, currently its biggest overseas market, in the third quarter. In contrast, 30% of Huawei’s smartphone sales in 2015 were from overseas markets, around 7.5 million per quarter.

So if Xiaomi can’t regain momentum in the smartphone sector, what can get it back to the fast track?

The company unveiled its ecosystem strategy in 2014, investing in a wide variety of smart hardware startups to help them sell their products through Xiaomi’s distribution channels. The company invested in almost 50 Chinese hardware startups as of October 2015.

Mi Power Bank, born from one of Xiaomi’s affiliated companies, is a best-selling product, even though it falls outside of the ‘smart ecosystem’ definition. 14.6 million units were sold in 2014. Xiaomi CEO Lei Jun even noted that sales of the product underperformed, citing counterfeits as a reason.

As of October 2015 some 30 million monthly active smart devices, all of which are made by Xiaomi ‘ecosystem companies’, were connected to 3 million Xiaomi smart WiFi routers in Xiaomi users’ homes.

Wearable maker Huami and earphone maker 1More are of the largest Xiaomi ecosystem companies in terms of sales. Both of them plan to expand into developed markets in 2016.

AMAZFIT

AMAZFIT

Huami has shipped more than 10 million Mi Bands, the activity tracking wearable they developed for Xiaomi, in 2015. Its annual revenue reached 1 billion yuan (about $150 million USD), with some 10 million yuan (roughly $1.5 million USD) in net profit each quarter, according to Wang Huang, founder and CEO of Huami. With list prices for the two Mi Band models at RMB69 and RMB99 respectively, Mi Band sales account for more than 70% of Huami’s total revenue. Mi Band is now the biggest selling activity tracker in China, largely thanks to its low-cost strategy and the Xiaomi brand.

Though the numbers look good, the company is shifting its position. Wang Huang noted that Chinese consumers have begun to demand higher quality products.

In 2015 Huami introduced a smart body scale, Huami Smart Chip (our translation), in-shoe sensors, and AMAZFIT, a button-sized activity tracking device. The company believes AMAZFIT demonstrates their capabilities to make well-designed, high-quality and relatively low-cost products. It’s priced at RMB299 (US$48), more than four times of the cost for the first-gen Mi Band.

All of their products will be targeted at the global market from 2016. Huami opened an office in Silicon Valley in 2014 and revealed ambitions for the European and U.S. markets from the very early stages.

 

Xiaomi Earbud

Xiaomi Earbud

Earphone maker 1More announced 17 million unit shipments as of November 2015 since its incorporation in 2013. It has developed a pair of earbuds and some around-ear headphones for Xiaomi. 1More targets lower-end, mainstream users, which account for 80% of total Chinese consumers, according to the company.

An accompanying music streaming app launched in October 2015 together with 1More’s latest models. The music streaming service is supported by Ultimate Music, a Chinese digital music content provider.

The company has set up ‘iMore USA’, a joint venture with American industry experts, Lin Boqing, the marketing chief of iMore told Sina Tech in a recent interview. Its goal is to roll out a product in the U.S. market and bring it back to China after it gains traction there.

Image credit: Huami, 1More