ohmrlobalobayeh
SENIOR MEMBER
- Joined
- Mar 24, 2012
- Messages
- 3,388
- Reaction score
- -23
- Country
- Location
What is wrong? Doesn't changes n addresses what I have stated. If XM indeed plans for a efficient ecosystem using the same amount of effort that they put into creating devices for their Mi Home series into processors for their phone, they would not be so reliant on Qualcom.No. You are wrong. Xiaomi is worth 100 bil in market cap not because it is selling smartphone but because of their vision.
For Xiaomi, the real money is not in gadgets
Rita Liao
2 months ago
Xiaomi’s bus stop advertisement in Shenzhen: “Technology on one facet, art on the other.” / Image credit: Tech in Asia
It’s official. Chinese behemoth Xiaomi has applied to sell its shares on the Hong Kong Stock Exchange, seeking to raise US$10 billion at a valuation of US$100 billion.
That would make the eight-year-old firm China’s third-most valuable technology company, trailing behind leader Alibaba and second-placer Tencent, as of this writing.
Xiaomi has long been known for its affordable handsets, but it’s not really banking on them – and connected devices in general – to make money. Company CEO and founder Lei Jun describes the firm’s business model as a “triathlon”, where it invests in companies producing hardware and devices, sells the products through its online and offline stores, and offers services for product users on the internet.
The internet services, according to the hardware giant’s playbook, will drive the bulk of its revenues down the road.
Not your average hardware company
From inception, Xiaomi has prided itself on offering “value for price.” Now it’s making good on that promise – indefinitely.
In late April, Lei announced that the company would put a five percent net profit margin cap on its hardware products, including smartphones and gadgets like hoverboards and air purifiers.
Although it’s low, the single-digit figure is “above average in China’s hardware industry,” Alex Huang, Asia-Pacific chairman of Segway-Ninebot, tells Tech in Asia. Huang’s company makes hoverboards for Xiaomi and is a top player in its field after acquiring its American counterpart three years ago.
Henry Chang, senior marketing manager at Xiaomi’s smart-home device manufacturer, Lumi United Technology, has the same view. “Hitting a five percent margin is difficult for Chinese hardware companies.”
In other words, selling hardware isn’t that lucrative in China.
Zooming in on smartphones, Xiaomi is dwarfed by its rivals – both locally and globally. While the company earns a meager US$2 in profit for every phone shipped, according to data collected by Counterpoint Research, its Chinese peers Vivo and Oppo – which also focus on affordable smartphones – earn about seven times that. For further comparison, Apple’s profit per unit shipped stands at a staggering US$151.
For now, gadgets remain Xiaomi’s major source of income, but this is expected to change soon.
By 2019, Xiaomi aims to widen the share of its internet services beyond that of hardware, a freelance technology writer familiar with the matter wrote in a blog post.
As Lei pointed out in his speech at Yale Center Beijing last fall, “If we don’t offer internet services, our model would be the same as any hardware company, and our company wouldn’t be sustainable.”
Being cheap
Unlike most hardware firms, Xiaomi doesn’t make gadgets itself. It employs an “ecosystem” approach, where it invests in device manufacturers like Lumi United and Segway-Ninebot, which then carry out Xiaomi’s product requests.
To ensure that the startups stick to its core values of quality and affordability, Xiaomi sends engineers to work alongside them. The startups accept low margins in exchange for huge sales volumes that come with joining the Xiaomi ecosystem. As of the fourth quarter of 2017, Xiaomi was the world’s third-largest wearables company by shipment, according to IDC.
See: Inside Xiaomi: The perks and perils of startups that join its ecosystem
The finished products are then sold via Xiaomi’s online retail channels and its growing network of brick-and-mortar shops across China, as well as in developing countries such as India. Having in-house channels helps Xiaomi save on distribution fees, a common stumbling block for phone brands.
These strategies have allowed Xiaomi to gain price advantage over its rivals. The company’s IPO filings show that its average phone costs only US$138, while an average iPhone has surged to nearly US$800.
Cashing in
While internet services are expected to be the main revenue driver, Xiaomi’s ability to amass users for those services depends on how many devices it can sell via its retail channels.
Amidst slowing online retail growth in China, the company has been ramping up its physical presence, a move that other internet giants like Alibaba and JD have also made. Offline channels, coupled with aggressive overseas expansion, have played a huge role in Xiaomi’s comeback in 2017, following several quarters of depressing smartphone sales.
Xiaomi’s flagship store in Shenzhen. / Image credit: Xiaomi
“When customers shop for Xiaomi phones at its storefronts, they may also end up buying its non-phone products like a power bank or a suitcase, and vice versa,” notes James Yan, research director at Counterpoint Research.
Margins for offline retail may be low – it costs a lot more to operate physical outlets – but the sales volume will be huge, he adds.
Once consumers get on Xiaomi’s cheap devices, the firm presents a more aggressive payment schedule. For instance, it lures users to buy software from its app store, make purchases inside its games, or pay for customized themes to jazz up their Xiaomi operating systems. Those who own Xiaomi’s smart-home devices may opt to pay for its suite of entertainment services, akin to how Apple users pay for its content.
When customers shop for Xiaomi phones at its storefronts, they may also end up buying its non-phone products like a power bank or a suitcase, and vice versa.
On the business side, brands can buy ads pushed to Xiaomi software, and developers can pay to get their apps pre-loaded onto Xiaomi devices.
With a gross margin of roughly 60 percent, the internet services segment was already the main driver behind Xiaomi’s operating profit last year, which more than tripled to US$1.92 billion, according to its filings.
Moving up the income ladder
As rosy as the plan sounds, Xiaomi will need to diversify its user base to sustain growth. The brand is particularly popular amongst China’s lower-income population, which means less generous spenders. Xiaomi, along with Oppo and Vivo, account for 70.5 percent of the smartphone consumption by Chinese people with a monthly salary less than US$628, according to a research by MobData.
“Xiaomi will soon hit the ceiling on the lower-income group,” suggests Flora Tang, an analyst at Counterpoint Research.
Xiaomi’s foray into lifestyle products might help. Its ecommerce platform Youpin focuses on affordable premium goods, such as a smart scale that can calculate one’s body fat. This approach could appeal to China’s sophisticated consumers.
[The] challenge of Xiaomi is that it’s trying to do something that hasn’t been done before by either Apple or Fitbit: becoming a software company built on hardware.
According to big data company Jiguang, over half of the users on premium ecommerce apps live in China’s first- and second-tier cities. Youpin is ranked third among these apps.
“I think the challenge of Xiaomi is that it’s trying to do something that hasn’t been done before by either Apple or Fitbit: becoming a software company built on hardware,” contends Benjamin Joffe, general partner at HAX.
Lei once said that it’s hard to define what Xiaomi is without knowing what the company does. Following the giant’s flotation, the world will be watching more closely how its triathlon model plays out.
Currency converted from Chinese yuan. Rate: US$1 = RMB 6.37
I'm typing all these on my Redmi 5 Plus btw.
What is wrong? Doesn't changes n addresses what I have stated. If XM indeed plans for a efficient ecosystem using the same amount of effort that they put into creating compatible devices for their Mi Home series into processors for their phone, they would not be so reliant on Qualcom.No. You are wrong. Xiaomi is worth 100 bil in market cap not because it is selling smartphone but because of their vision.
For Xiaomi, the real money is not in gadgets
Rita Liao
2 months ago
Xiaomi’s bus stop advertisement in Shenzhen: “Technology on one facet, art on the other.” / Image credit: Tech in Asia
It’s official. Chinese behemoth Xiaomi has applied to sell its shares on the Hong Kong Stock Exchange, seeking to raise US$10 billion at a valuation of US$100 billion.
That would make the eight-year-old firm China’s third-most valuable technology company, trailing behind leader Alibaba and second-placer Tencent, as of this writing.
Xiaomi has long been known for its affordable handsets, but it’s not really banking on them – and connected devices in general – to make money. Company CEO and founder Lei Jun describes the firm’s business model as a “triathlon”, where it invests in companies producing hardware and devices, sells the products through its online and offline stores, and offers services for product users on the internet.
The internet services, according to the hardware giant’s playbook, will drive the bulk of its revenues down the road.
Not your average hardware company
From inception, Xiaomi has prided itself on offering “value for price.” Now it’s making good on that promise – indefinitely.
In late April, Lei announced that the company would put a five percent net profit margin cap on its hardware products, including smartphones and gadgets like hoverboards and air purifiers.
Although it’s low, the single-digit figure is “above average in China’s hardware industry,” Alex Huang, Asia-Pacific chairman of Segway-Ninebot, tells Tech in Asia. Huang’s company makes hoverboards for Xiaomi and is a top player in its field after acquiring its American counterpart three years ago.
Henry Chang, senior marketing manager at Xiaomi’s smart-home device manufacturer, Lumi United Technology, has the same view. “Hitting a five percent margin is difficult for Chinese hardware companies.”
In other words, selling hardware isn’t that lucrative in China.
Zooming in on smartphones, Xiaomi is dwarfed by its rivals – both locally and globally. While the company earns a meager US$2 in profit for every phone shipped, according to data collected by Counterpoint Research, its Chinese peers Vivo and Oppo – which also focus on affordable smartphones – earn about seven times that. For further comparison, Apple’s profit per unit shipped stands at a staggering US$151.
For now, gadgets remain Xiaomi’s major source of income, but this is expected to change soon.
By 2019, Xiaomi aims to widen the share of its internet services beyond that of hardware, a freelance technology writer familiar with the matter wrote in a blog post.
As Lei pointed out in his speech at Yale Center Beijing last fall, “If we don’t offer internet services, our model would be the same as any hardware company, and our company wouldn’t be sustainable.”
Being cheap
Unlike most hardware firms, Xiaomi doesn’t make gadgets itself. It employs an “ecosystem” approach, where it invests in device manufacturers like Lumi United and Segway-Ninebot, which then carry out Xiaomi’s product requests.
To ensure that the startups stick to its core values of quality and affordability, Xiaomi sends engineers to work alongside them. The startups accept low margins in exchange for huge sales volumes that come with joining the Xiaomi ecosystem. As of the fourth quarter of 2017, Xiaomi was the world’s third-largest wearables company by shipment, according to IDC.
See: Inside Xiaomi: The perks and perils of startups that join its ecosystem
The finished products are then sold via Xiaomi’s online retail channels and its growing network of brick-and-mortar shops across China, as well as in developing countries such as India. Having in-house channels helps Xiaomi save on distribution fees, a common stumbling block for phone brands.
These strategies have allowed Xiaomi to gain price advantage over its rivals. The company’s IPO filings show that its average phone costs only US$138, while an average iPhone has surged to nearly US$800.
Cashing in
While internet services are expected to be the main revenue driver, Xiaomi’s ability to amass users for those services depends on how many devices it can sell via its retail channels.
Amidst slowing online retail growth in China, the company has been ramping up its physical presence, a move that other internet giants like Alibaba and JD have also made. Offline channels, coupled with aggressive overseas expansion, have played a huge role in Xiaomi’s comeback in 2017, following several quarters of depressing smartphone sales.
Xiaomi’s flagship store in Shenzhen. / Image credit: Xiaomi
“When customers shop for Xiaomi phones at its storefronts, they may also end up buying its non-phone products like a power bank or a suitcase, and vice versa,” notes James Yan, research director at Counterpoint Research.
Margins for offline retail may be low – it costs a lot more to operate physical outlets – but the sales volume will be huge, he adds.
Once consumers get on Xiaomi’s cheap devices, the firm presents a more aggressive payment schedule. For instance, it lures users to buy software from its app store, make purchases inside its games, or pay for customized themes to jazz up their Xiaomi operating systems. Those who own Xiaomi’s smart-home devices may opt to pay for its suite of entertainment services, akin to how Apple users pay for its content.
When customers shop for Xiaomi phones at its storefronts, they may also end up buying its non-phone products like a power bank or a suitcase, and vice versa.
On the business side, brands can buy ads pushed to Xiaomi software, and developers can pay to get their apps pre-loaded onto Xiaomi devices.
With a gross margin of roughly 60 percent, the internet services segment was already the main driver behind Xiaomi’s operating profit last year, which more than tripled to US$1.92 billion, according to its filings.
Moving up the income ladder
As rosy as the plan sounds, Xiaomi will need to diversify its user base to sustain growth. The brand is particularly popular amongst China’s lower-income population, which means less generous spenders. Xiaomi, along with Oppo and Vivo, account for 70.5 percent of the smartphone consumption by Chinese people with a monthly salary less than US$628, according to a research by MobData.
“Xiaomi will soon hit the ceiling on the lower-income group,” suggests Flora Tang, an analyst at Counterpoint Research.
Xiaomi’s foray into lifestyle products might help. Its ecommerce platform Youpin focuses on affordable premium goods, such as a smart scale that can calculate one’s body fat. This approach could appeal to China’s sophisticated consumers.
[The] challenge of Xiaomi is that it’s trying to do something that hasn’t been done before by either Apple or Fitbit: becoming a software company built on hardware.
According to big data company Jiguang, over half of the users on premium ecommerce apps live in China’s first- and second-tier cities. Youpin is ranked third among these apps.
“I think the challenge of Xiaomi is that it’s trying to do something that hasn’t been done before by either Apple or Fitbit: becoming a software company built on hardware,” contends Benjamin Joffe, general partner at HAX.
Lei once said that it’s hard to define what Xiaomi is without knowing what the company does. Following the giant’s flotation, the world will be watching more closely how its triathlon model plays out.
Currency converted from Chinese yuan. Rate: US$1 = RMB 6.37
Alibaba was originally making money via it's on internet avenue, it's B2B platform, yet it has since diversified into semiconductors now- a different division from it's internet cozy nest.
I repeat again:
U said I'm wrong,
So what is wrong?
Last edited:
