What is Xiaomi truly selling?

There are a bunch of people say Xiaomi is not selling cell phone but a entire Mi-ecosystem since they don't make profit by making hardware. Could anyone further illustrate it?


Assuming links work here, a couple good articles:

In short, everyone wants a piece of the ecosystem game. Some is poorly thought out (Leap Motion is doing it badly) but for the core concept I refer you to Motorola's mobile phone business. Several times they have been the absolute dominant force in the industry. But, when you sell consumer hardware only, busts can follow booms. And did for them, many times.

An ecosystem means ongoing revenue, not just periodic hardware sales. It means secondary market sales are the same to you, as the ongoing revenue is what you want, and it means increased stickiness. Apple lives by this, and embraces their customers being stuck on their products.

There is almost no such thing as an apples-to-apples comparison consumers can make when the get used to your ecosystems. Perceived or actual switching costs muddy the waters for them, so you have them longer. Xiaomi is getting this sort of loyalty.

There's other interesting issues having to do with their market. Play store, for example, is not really a thing in China. I can go on and on about this, so ask me if you have additional questions.

Answered 8 years ago

They sell software on the hardware that they sell at a loss. Is it that complicated? Amazon kindle, Xbox are similar business models that forgo profitable COGS for future cashflow.

Answered 8 years ago

Smartphone maker Xiaomi Corp. filed for its initial public offering (IPO) in early May of 2018. The Beijing-based company, headed by co-founder and Chief Executive Officer Lei Jun, generates revenue through four primary business segments: smartphones, Internet of Things (IoT) and lifestyle products, internet services, and miscellaneous additional services and products. The company ambitiously anticipated an enterprise value of as much as $100 billion during its IPO. On July 9, 2018, Xiaomi made its debut on the Hong Kong Stock Exchange, closing at 16.80 yuan (or $2.14), thus yielding a market capitalization of about $50 billion, which is half of what Jun had hoped for when the listing was announced. As of July 19, 2019, that market cap figure has fallen further, down to under $28 billion. The company's P/E ratio is 9.53. Xiaomi was founded in 2010, launching its own operating system later that year and releasing its first smartphones in 2011. CEO Lei Jun founded the company after selling his software provider Kingsoft Corp. to Inc. (AMZN). The serial entrepreneur told Bloomberg that what drives him the most in his role at the helm of the smartphone manufacturer is not the money his firm stands to make, but rather the opportunity to serve at the helm of a Chinese company and "to become No. 1 in the world," alongside national tech titans like Jack Ma's Alibaba Group (BABA), Pony Ma's Tencent Holdings, and Robin Li's Baidu Inc. (BIDU), as well as international behemoths like Apple Inc. (AAPL). In just a few years, Xiaomi had grown into the largest smartphone maker in China. However, sales plummeted in 2016, and the company fell in the rankings. Many in the fast-moving tech world assumed that Xiaomi would collapse entirely. Against all odds, the company surged beginning in 2017, while sales figures and revenue have risen since that time.

Nonetheless, Xiaomi's stock price languishes far below its IPO close as of this writing. Xiaomi originally filed to list in Hong Kong and later hoped to split the offering by selling half of the IPO shares to investors in Shanghai through Chinese Depository Receipts. The plan to list on mainland China was later put on hold and the company gave no indication of a timeline of when that would happen. Bloomberg reported that regulatory hurdles caused Xiaomi to ditch its mainland listing, while moving ahead with its Hong Kong debut. According to its annual results for 2018, Xiaomi generated about $25.4 billion in revenue last year, up by a whopping 52.6% over 2017. About two-thirds of the company's revenue comes from its smartphone segment. At its low point in 2016, Xiaomi saw smartphone sales decline to 41 million, down from a reported 70 million in 2016, according to the IDC. Its billionaire founder, who has been dubbed "the Steve Jobs of China," decided his company would sell much more than smartphones. Initially, Xiaomi had funded itself on selling hardware products and online services, like many of its peers in the internet age. The company generated a bulk of its revenue from lower-margin device sales, while the majority of its profits came from its online service business. Its hundreds of products, such as branded scooters, chargers, air purifiers, suitcases, and smartphones, work as platforms for services such as cloud storage, while also providing a monthly subscription for thousands of hours of TV shows, movies, games, and other offerings. Other services include a profitable online service providing small loans to Xiaomi phone users powered by a next-gen artificial intelligence engine that assesses credit worthiness, according to Wired.
Xiaomi continues to make a bulk of its revenues on phones, which generate about $2 in revenue per unit and account for 65% of total revenue. Smartphone revenue increased by about 41% from 2017 to 2018; in 2018, the company sold just under 119 million smartphone units. While most of these phones are still sold in China, the company's international smartphone sales figures have continued to grow as well. Sales of other gadgets made up about 25% of revenue in 2018, or about $6.4 billion. This segment includes a wide variety of Internet-capable products such as smart TVs, electric scooters, vacuum cleaners, cameras, rear view mirrors, and more. Revenue from the sale of smart TVs and laptops was particularly strong; it nearly doubled from 2017 to 2018.
Besides if you do have any questions give me a call:

Answered 2 years ago

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