It may be the most typical so-called ‘selling mobile phones at such low cost’ Chinese company.
Early:
For example, Xiaomi Mi 1, a phone important enough to be written significantly in history of Chinese smartphone, whose price is ￥1,999 in 2011. The price is so low that everyone was laughing at Xiaomi and thought it would go bankrupt soon. For no one except piracy makers can product a phone with such a strong power(screen, CPU, camera…… in short, Xiaomi gives a phone worths far more than ￥1,999)
Why dare the company?
I think one reason is actually it’s not a phone sold to common people so Xiaomi use a new way in phone area to sell it: snap up. Xiaomi doesn’t have enough products so they ask people to snap up online, in this way can they earn a little money. If you can buy Xiaomi as easily as buy iPhone, Xiaomi will lose a lot money for it doesn’t have so many loyal users.
As I said, these people waiting online to get a phone can’t be the old lady you meet in supermarket, so who are they? It’s about the first and major product of Xiaomi: MIUI.
MIUI is based on Android, and you know in 2011, the original Android is not as good as it today. Programmer from all over the world programmed different UIs to make phones satisfied to use and MIUI is one of them. The special thing of MIUI is that you can take a part in its developing even though you don’t know much about programming. All you need to do is discuss your problem in its forum then the team will consider your suggestion. In fact, MIUI beta is still updated once a week now. They do it for almost 10 yrs.
So you can know why Xiaomi can sell a phone with little reputation, its slogan is ‘Born for geeks’. That’s enough for snapping up.
Another reason is the cost of a phone is not expensive as you think. A lot of them just want to earn your money. We need to thank companys brave enough to low the price for eventually we the consumers win. But if the monopoly market appear, we have to take the high price finally.
Now:
Jun Lei, the boss of Xiaomi, said in 2018, ‘the hardware profit margin will never higher than 5%’. So where does the profit come from?
In the annual report of 2019 of Xiaomi，it says in income area:
Phones selling (Mi & Redmi): 59.3%
AloT: 30.2%
Internet Servey: 9.6%
Others: 0.9%
Xiaomi puts a lot in AloT, knowing it can’t rely on phones too much. Also in this report, we know AloT income rises of 41.7%. I don’t clearly know the selling situation of Xiaomi TV and other AloT devices outside China, but here Xiaomi is getting more and more market share. So we know, the phone is cheap, and Xiaomi earns a lot in AD and AloT. I think Xiaomi’s plan is about ‘a phone, everything in life’.
The New Mi 10 & Pro is a big step of Xiaomi to reach a high price. But now after seeing OPPO Find X2, HUAWEI P40 series, vivo NEX 3S…… I think it’s still really cheap.
Here is the official simplified annual report of 2019:
