China’s Xiaomi Passes Apple as Top Producer of Wearables

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Apple Inc. (NASDAQ: AAPL) smartwatch sales have not been enough to keep the American tech giant in the lead for global shipments of wearables. In the second quarter, the distinction as number one in the market went to China’s smartphone giant Xiaomi. As a matter of fact, Apple fell to third place behind FitBit Inc. (NYSE: FIT), which has struggled to increase revenue in recent months

According to research firm Strategy Analystics, wearable shipments reached 22 million in the second quarter of the year, up a very modest 8%. Most Xiaomi shipments were in its home market. Neil Mawston, executive director at Strategy Analytics, said:

Xiaomi shipped 3.7 million wearables worldwide in Q2 2017, rising 23 percent annually from 3.0 million units in Q2 2016. Xiaomi captured 17 percent global marketshare and overtook Fitbit and Apple to become the world’s largest wearables vendor. Xiaomi’s Mi Band fitness trackers are wildly popular in China, due to their highly competitive pricing and rich features such as heart-rate monitors, step-counters and calendar alerts. Fitbit shipped 3.4 million wearables for 16 percent marketshare worldwide in Q2 2017, almost halving from 29 percent a year ago. Fitbit is at risk of being trapped in a pincer movement between the low-end fitnessbands sold by Xiaomi and the fitness-led, high-end smartwatches sold by Apple.

Apple shipped 2.8 million wearables and had a 13% share.

Worries about FitBit have shown in its share price. The company’s stock trades at $5.07, down from a 52-week high of $17.18. Its sales dropped sharply in the second quarter, to $353 million from $586 million in the same period a year earlier. Analysts were encouraged that FitBit lost less than expected and selling new products would help holiday sales. Some observers still question whether it is a viable standalone company.

In one way, Apple’s numbers were encouraging. Its 2.8 million shipments in the second quarter were up from 1.8 million the year earlier. Apple continues to build a wearable that can generate the demand and market share of its smartphone and computer products.

The wearables market itself is in trouble. For a relatively new set of products, shipments have been extremely low worldwide. That means the market eventually may not be valuable to anyone.