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China Xiaomi's emergence as the world's third largest smartphone vendor in the last quarter should have surprised no one. However, it's a milestone significant enough to pose the question of how -- not if -- the rules have changed in the global smartphone market.

First, the US and European markets......
are becoming irrelevant. Growth momentum and volume have withered in those developed regions. Xiaomi ranks number three in the market, after Samsung and Apple, without setting foot in the United States or Europe.

Top Five Smartphone Vendors, Q3 2014 Preliminary Data (Units in Millions)

(Image: IDC Worldwide Quarterly Mobile Phone Tracker, October 29, 2014)

Second, it turns out that winners in the global smartphone battle are not an army of no-name Chinese whitebox vendors with me-too products or fake iPhones. While there is no denying of the power of whitebox companies in China, leading the domestic market in China are branded phones like those from Xiaomi.

Third, Xiaomi has built enough star power to make every Chinese proud. It's also generating buzz and praise beyond China. Given time and global attention, Xiaomi's impact could reach the whole Chinese electronics market, strengthening the indigenous industry. Similarly, the rise of Sony gave birth to a number of strong electronics manufacturers in Japan, each one striving to become either a Sony rival or a supplier.

Fourth, the cost of a smartphone is vitally important in the global smartphone battle. More important, though, is how to lower the cost (of products and operations), without sacrificing quality. Apple, although no low-cost smartphone vendor, keeps its costs in check by limiting the number of iPhone models it rolls out. For Samsung, the sheer volume of sales is its edge. Xiaomi, meanwhile, relies on its online sales strategy (they do not sell their phones at retail) to keep its operational cost down. The Chinese company also prefers products with a longer product cycle.

There are a growing number of other vendors (shown in green) above.

(Image: IDC)

Fifth, the game is far from over. There's a lot of room left for everyone to grow. As Ramon Llamas, research manager with IDC's Mobile Phone team, noted, "a driving force behind the record smartphone volume [in the third quarter] was the combined effort of the vendors trailing market leaders Samsung and Apple." He explained, "The next three vendors -- Xiaomi, Lenovo, and LG Electronics -- all posted market-beating growth and with markedly different strategies."

Whether in the low end as Lenovo has done, at the high end where Xiaomi competes, or in both as LG Electronics has shown, "There are a number of other vendors achieving similar results," he concluded.

In the following pages, EE Times focuses on Xiaomi and dissects what makes Xiaomi stand out not only from its fellow Chinese smartphone vendors but from its global competitors.

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China rising: Xiaomi becomes world's third biggest smartphone

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