(Telecompaper) Global smartphone shipments grew 27 percent annually to reach a record 320.4 million units in the third quarter of 2014, according to the latest report from Strategy Analytics, with Chinese manufacturer Xiaomi accounting for 5.6 percent of the market and becoming the world's third largest smartphone vendor for the first time ever. The company only entered the market three years ago, but its Android-powered smartphone models are extremely popular in the China, where it has set up an extensive online and operator sales network. Having sold 18.0 million smartphones in the quarter, Xiaomi's next step is to target the international market in Asia and Europe, said the report, but it will face the twin problems of low brand awareness and technology-patent challenges next year. The market is still dominated by Samsung, but its share of 24.7 percent was significantly lower than the 35.0 percent it captured in the year-earlier quarter. The company is facing tough competition from Apple at the higher-end of the smartphone market, from Xiaomi and Huawei in the middle-tiers, and from Lenovo and others at the entry-level. Apple's share also dipped to 12.3 percent from 13.4 percent a year earlier, having shipped 39.3 million iPhones worldwide during the quarter. According to the report, Apple's iPhone growth is slowing worldwide because of its limited presence in the fast-growing entry-level segment.