Apple's China woes stoke USD20 billion Xiaomi rally

Chinese Android makers are capitalising as Apple posts sliding revenue in the country, even amid signs that Asia's largest smartphone market is starting to bottom out after years of decline.

Xiaomi's 14 series has received over one million orders since its late-Oct launch. That marks the 2nd smash debut for a Chinese smartphone in just the past few months, following Huawei's success with the Mate 60 Pro. Huawei is unlisted, but investors have been snapping up shares of its suppliers.

While Xiaomi's stock has surged on the stellar 14 series orders, some analysts say it's poised to climb even higher. EVs and the so-called "artificial intelligence of things" (AIoT) are seen as potential additional catalysts.

"We believe there is a trading opportunity in the next 6 months with smartphone and AIoT growth turnarounds and early expectations building for Xiaomi's EV foray," Gokul Hariharan, an analyst at JPMorgan Chase wrote in a note last week, upgrading the stock to overweight.

Other Wall Street firms including Morgan Stanley and Citigroup have cited signs of an end to China's smartphone downturn and a likely recovery into next year. Huawei's surprisingly strong comeback has helped triggered Chinese consumer appetite for innovative local products.

"Huawei is clearly gaining ground rapidly following the new product launch featuring its unique camera function and satellite calling," said Jian Shi Cortesi, a fund manager at GAM Investment Management. ”iPhone sales are losing momentum in China at the moment, as many consumers don't perceive much functionality improvement in the new iPhone.”

Xiaomi's 14 series also sports an advanced camera, as well as the latest Qualcomm processor and an innovative operating system called HyperOS designed to connect the smartphone to autos, appliances and other AIoT devices.

While Huawei is likely to gain the most share among Chinese brands in the current smartphone cycle, Xiaomi's technology should help it fend off rivals including Oppo and Vivo into next year, according to Bloomberg Intelligence analyst Steven Tseng. "In addition, the potential growth opportunity in overseas markets will be in favour of Xiaomi, which has the best overseas presence among all Chinese phone vendors," he said.

Market watchers say the shares could rise further on upcoming catalysts including Singles' Day and results for the third quarter due Nov 20.

"Xiaomi is the only top five smartphone brand to see shipment increases both quarter on quarter and year on year in Q3 2023 as it strengthened its positions in key markets such as China and India," Counterpoint Research wrote in a note.

The company notched "historical high" gross merchandise value for Singles' Day, helped by strong performance for the 14 series, Goldman Sachs Group analyst Timothy Moe wrote in a note.