Apple, Samsung, Lenovo … and Xiaomi?

Two years ago, Samsung was on a roll. Its Galaxy S3 model shot past Apple’s iPhone 3 to become the best selling smart phone in the world. And in China, Samsung itself supplanted Apple as the most popular brand.

For a while, it appeared that the smart phone sector might go the way of the automobile industry, where an upstart Asian manufacturer named Toyota surpassed a once-dominant firm named General Motors in both sales volume and brand perception. But has that actually occurred in the phone sector during the past two years?

Fortunately for Apple, the tide has turned. Last week, the China Brand Research Center (CBRC) announced that Apple had retaken the top spot in brand perception from Samsung in China. And during the past month, Apple’s latest iPhone 6 model outsold Samsung’s Galaxy Note 4 in many regions, including Samsung’s home nation of South Korea.

So has Apple turned the tables on Samsung? Has the American firm taken the fight to its Korean foe in Asia’s largest markets, and reasserted itself as the world’s dominant smart phone maker?

In a word: “no.” Based on the most recent quarterly sale data, Samsung still leads Apple in global market share. And although Apple is closing the gap, both firms have been losing market share since the fourth quarter of last year.

To whom? To the Chinese firms Lenovo and Xiaomi, which have been growly rapidly at the lower end of the market spectrum. Lenovo grabbed significant market share by absorbing the handset manufacturer Motorola, while Xiaomi has surged in popularity by emulating Apple’s strategy.

In fact, “emulation” doesn’t begin to describe how closely Xiaomi is following Apple’s playbook. Its chief executive Lei Jun even appears at new product presentation events in Steve Jobs’ classic “black shirt and blue jeans” attire.

In other words, although Apple and Samsung are locked in a battle for the top spot in both sales volume and brand value, it would be inappropriate to continue to characterize the firms as the dominant forces in the industry. In truth, both firms are struggling to maintain their customers in the face of Chinese competition.

So is it possible that Apple and Samsung may eventually follow the path of General Motors? And some day, may Lenovo and Xiaomi surpass these firms in the manner of Toyota?

As long as Apple can continue to maintain superior brand value, its reputation for quality may help inoculate it against the encroachment of less costly consumer products. That’s why CBRC’s recent announcement was so meaningful to the American firm.

Nevertheless, when smaller upstart firms (like Xiaomi) can make inroads by simultaneously building reputations for both affordability and quality, it’s time for the established players to worry.

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