Xiaomi has a long way to go before launching a phone in the U.S.

Flagging sales in China could lead to Xiaomi accelerating its U.S. launch window, but there's a lot of work to be done.

Xiaomi has been rumored for a long time to bring its value-for-money phones to the U.S. market, and it looks like the brand is paving the way for a debut in the country. In an interview with Bloomberg, Xiaomi's global VP Hugo Barra said that the company would enter the U.S. market "in the near future."

The company has been making strides toward an eventual launch in the U.S. market: Xiaomi already sells fitness trackers and power banks in the country from its e-commerce store, and the brand signed patent deals with Microsoft and Qualcomm in recent months.

Without going into the specifics, Barra said that a product the vendor "talked about previously" will make its way to the U.S. in October. While it could mean the launch of the Mi 5 or the budget Redmi Note 3 in the country, it is more likely we'll see the arrival of the Mi Band 2, the successor to the popular $15 Mi Band fitness tracker.

Coming to America

Barra said that the U.S. launch would progress slowly, as Xiaomi needs to establish an after-sales network from the ground up. Given that Xiaomi primarily sells phones online through its own store, setting up a robust customer service network is vital before it starts selling phones in the country, as you won't be able to take a Xiaomi phone to your local AT&T or Verizon store to get it serviced.

As for sales strategy, Xiaomi will continue to rely on social media, an approach that paid dividends for the brand in China and India:

The U.S. is a market that we definitely have in our sights. We will lead with social media, with the channels that allow us to get in touch with the young generation that are enthusiastic about new technology. We are definitely going there.

The U.S. is a very important market for any consumer electronics and lifestyle brand, certainly for us as well. Obviously we've got to time things carefully.

Then there's the matter of competition. Xiaomi's rise to fame was largely because it undercut Apple and Samsung, offering high-end hardware for a fraction of the cost. While that model worked magnificently for the vendor three years ago, other manufacturers have adopted a similar strategy, with the likes of the OnePlus 3, ZTE Axon 7, and the Honor 8 featuring flagship-level hardware for $400. Just like in China and India, it will be hard for the vendor to compete in the mid-range segment.

Xiaomi has successfully managed to undercut Apple and Samsung, but it isn't the only vendor to do so.

A bulk of Xiaomi's sales is in the entry-level segment, with the vendor selling over 110 million Redmi phones to date. However, the margins in the budget segment are razor-thin, which is why Xiaomi needs to have a strong showing in the mid-range segment. The current flagship Mi 5 has specs similar to that of the OnePlus 3, but it fails to translate that to real-world performance.

Xiaomi is all set to launch a phone later this year, with rumors suggesting we'll see the Mi Note 2. The current batch of rumors indicate a phone with a 5.7-inch QHD display with dual curves like the S7 edge, Snapdragon 821 SoC, dual cameras at the back, 6GB of RAM, and a 4000mAh battery. The phone is also likely to be certified for Google's Daydream virtual reality platform, much like ZTE's Axon 7. The Mi Note 2 could be the phone that kicks off Xiaomi's U.S. journey, but we're still some ways off before the phone is official.

Trouble in Asia

Entering new markets is pivotal to Xiaomi's continued growth following a downturn in sales in key markets. However, the brand is facing an increased threat from the likes of OPPO, Huawei, and vivo in key markets. According to the latest numbers from the IDC, Xiaomi shipped 10.5 million handsets in China in Q2 2016, a decline of 38.5% from the 17.5 million shipments during the same period last year. Xiaomi now accounts for 9.5% of the market, and is in fourth place behind Huawei, OPPO, and vivo.

OPPO and vivo witnessed a huge increase in shipments — to the tune of 124.1% and 74.1% YoY respectively — due to their focus on offline stores. Huawei, meanwhile, saw a modest 15.2% uptick in shipments from Q2 2015, with the three brands now occupying 46.6% of the Chinese market.

In India, the company has sold over 1.75 million units of the budget Redmi Note 3, which accounted for a majority of its shipments this quarter. Recent launches like the Mi Max are getting a lot of attention, but Xiaomi is no longer among the top five vendors in the country. Samsung is leading the pack with strong sales of the abominable Galaxy J series, followed by Micromax. Lenovo's Moto G4 Plus and the more recent Vibe K5 Plus are also doing well in the country.

With other vendors successfully managing to take a leaf out of its playbook, Xiaomi's first priority will be to claw back market share in its two largest markets before entering the competitive U.S. market.

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