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Do Apple And Xiaomi's Numbers Bode Poorly For China's Smartphone Market?

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Do Apple And Xiaomi's Numbers Bode Poorly For China's Smartphone Market?

Several important players in the Chinese smartphone space showed concerning numbers this week, an indication to some investors that demand in the Chinese smartphone market might be lagging.

One of the largest Chinese smartphone manufacturers, Xiaomi, missed a $1 billion target for internet service and handset revenue in 2015, Reuters reported.

Internal Xiaomi documents reveal that the company's internet service division saw a 150 percent increase in revenue from last year. However, that increase only brought home $563 million in revenue, little more than half of the $1 billion target. Xiaomi sold 70 million phones in 2015, Forbes reported.

Xiaomi proved itself to be a Pacific powerhouse last year in its second round of funding, when it raised $1.1 billion on a $45 billion valuation. That $45 billion represents more than a 1,000 percent increase on its last valuation of $4 billion off $216 million in funding in 2012.

Related Link: What's Wrong With Apple...And What Tim Cook Can Do To Fix It

Apple Effect

News of Xiaomi's short performance comes as Apple Inc. (NASDAQ: AAPL) announced its first-ever slump in smartphone sales and revealed it missed shipment targets in its top product categories: iPhones, iPads and iMacs. The company also came in $790 million short of its 2015 revenue target.

Underwhelming performance from two of the world's top smartphone companies might cast doubt on the smartphone market's ability to maintain growth.

Many Apple suppliers adjusted earnings figures and missed revenue targets in fourth-quarter filings released in late January. On Tuesday, SK Hynix Inc missed analyst profit projections, according to Bloomberg. Investors initially reacted favorably to the news, pushing the stock, but eventually shares tumbled by 4 percent.

Apple supplier Skyworks Solutions Inc (NASDAQ: SWKS) was trending down on Wednesday, recently down more than 5 percent.

Silver Lining

Some Wall Street analysts saw silver linings among the news.

"We think China OEMs are faring better than feared," MKM executive director Ian Ing said in a note. The analyst pointed to Spreadtrum, a Samsung chip supplier, and noted that it had potential to double shipments of particular chipsets this year.

Ing expressed confidence in Samsung's technological advances that will allow it to make more efficient use of its suppliers' chips.

Benzinga has reached out to Xiaomi for comment.

Related Link: 5 Apple Suppliers To Buy Instead Of The Stock

Is Downside In Store For Peers?

Here are a handful of Apple supplier stocks to keep an eye on as the market learns more about smartphone companies' fourth-quarter performances and 2016 projections:

  • Foxconn Technology Co Ltd

  • Western Digital Corp (NASDAQ: WDC)

  • QUALCOMM, Inc. (NASDAQ: QCOM)

  • Analog Devices, Inc. (NASDAQ: ADI)

  • Diodes Incorporated (NASDAQ: DIOD)

  • Avago Technologies Ltd (NASDAQ: AVGO)

  • Fairchild Semiconductor Intl Inc (NASDAQ: FCS)

  • Intel Corporation (NASDAQ: INTC)

  • Jabil Circuit, Inc. (NYSE: JBL)
 

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