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China Roundup: Alibaba Share Price Touches New High and Lenovo Completes Motorola Mobility Buyout

by Major

October 31, 2014

Beijing-Animal-figurines-on-roof-650x400

This week, Xiaomi was officially crowned the world’s third-largest smartphone maker but news of Lenovo completing its buyout of Motorola Mobility is clouding the verdict; and meanwhile the Alibaba share price touched new highs.

China’s smartphone market: game of thrones

Don’t be fooled by its innocent-sounding name—Xiaomi, which literally translates as “little rice”, leapfrogged ahead of competitors to become the world’s third-largest smartphone maker.

According to new statistics from IDC released on Wednesday, the four-year-old company shipped 17.3 million handsets in the third quarter of this year and grabbed 5.3% of the global market, surpassing LG and Lenovo and trailing only Samsung and Apple; its shipment more than tripled from the same period last year.

Xiaomi already dethroned Samsung to be the No. 1 phone maker in China in the second quarter; since then it has entered Indonesia and India, with goals to launch in Brazil and Mexico next year. This week, the company raised $1 billion through a three-year loan from 29 banks; although Xiaomi isn’t planning on going public soon, analysts say that the banks have rushed to the deal so that they may benefit from the relationship later when the phone maker does choose to list.

But going forward Xiaomi still faces strong competition from domestic players like Huawei and Lenovo. Just a day after Xiaomi claimed the No. 3 spot, Lenovo announced that it had finished the $2.91 billion buy-out of Motorola Mobility; the two brands combined would have pushed Xiaomi down to the No. 4 spot in the IDC ranking. Prior to sealing the deal, Lenovo was only 0.1% away from Xiaomi in terms of market share.

Huawei, which just released its new flagship phone Mate 7, didn’t make the top-five list of IDC. However, in a different ranking by Strategy Analytics, Huawei outranked Lenovo and trailed only Samsung, Apple, Xiaomi and LG globally, suggesting that the two firms were probably running neck and neck.

And in terms of overseas expansion, Huawei and Lenovo are definitely ahead of Xiaomi. Huawei’s shipments to the Middle East and Africa increased more than sixfold in the first half of the year; in Latin America, the number quadrupled; in Europe and Asia (excluding China), the firm’s shipment doubled.

Traditionally a PC maker, Lenovo is shifting its consumer business to smart devices like phones and tablets. Its smartphone business has set foot in Russia, India, Indonesia, Vietnam and Philippines, according to media accounts. Lenovo CEO Yang Yuanqing told BBC earlier this year that phone sales were undergoing explosive growth in Southeast Asia as well as Eastern Europe.

While the three Chinese companies all show great promise for the future, the current global and China champion Samsung seems to be hitting a roadblock. The South Korean company just posted a 49% drop of net profit in the third quarter mainly due to its relatively weak performance in China. As a result, its global market share shrank to 25% from the 31% recorded in the first three months of the year.

The fast declining of prominence of Samsung may remind you of the way Nokia collapsed. The leading phone brand in China for more than a decade, the Finnish company was crushed by Apple, Samsung and other Chinese firms. Last year, Nokia’s mobile business was sold to Microsoft for about $7.2 billion; 90% of its employees were laid off recently after the deal was complete. What’s also gone with the wind is the phone brand Nokia—Microsoft has decided to only keep the Lumia name for future products.

It’s too early to say whether Samsung would become the next Nokia, but staying ahead in China’s market is no easy job, especially when all the other firms are salivating over your success.

Alibaba’s new moves

After the initial setbacks, the Alibaba share price has been on a surge in the past weeks. On Tuesday, the e-commerce giant’s market value climbed above $247 billion briefly as the share price touched a peak of $100.50, surpassing the market value of Walmart, the world’s largest retailer by revenue (the price touched $100.67 on Thursday).

Alibaba is also so much more than Walmart in terms of business variety—on Wednesday, news came out that the firm’s media arm Alibaba Pictures is in talks with Sony Pictures to co-finance movies that aim at global audiences. The group is also discussing content deals and partnerships with 20th Century Fox and Lionsgate, according to sources of Variety.com. At the same time, the company joined hands with Youku-Tudou, China’s biggest online video streaming firm, to help market its shopping platforms through videos.

On the finance front, Alibaba Chairman Jack Ma and Apple CEO Tim Cook have both shown interest in teaming up by connecting Alipay with Apple Pay. Although Alipay is not part of the Alibaba Group that floated in the New York Stock Exchange in September, it’s considered an Alibaba affiliate tightly controlled by Ma and his business partners.

Apple Pay—enabled by near field communication (NFC) technologies, could be a good fit for Alipay, China’s dominant mobile payment system. But to make the deal happen, Ma and Cook would have to jump through regulatory hoops first—authorities banned the QR code payment method earlier this year due to security concerns.

In other news

China may soon free up the clearing market for bank cards, allowing clearing companies like Visa and MasterCard to expand their business in China. In an announcement posted online, the State Council said that foreign firms that meet its criteria could set up their own operations inside China; but it didn’t give more details or any timetables for the reform. Currently quasi-state-owned UnionPay monopolizes the clearing market in China with 3.53 billion cards in circulation since its founding in 2002.

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