Xiaomi Will Continue Pricing Its Goods Cheaply – Promises to Return Back Money if Profits Start Exceeding Certain Levels
Xiaomi has a unique business model that is considered highly pivotal for its success. The company recently announced that if it makes a lot of profit, it will give a part of it to its customers. The company reiterated its pledge to keep hardware profit margin to a minimum.
Xiaomi Claims That Its Net Profit Margin for Certain Products, Which Includes Smartphones Will Not Exceed 5 Percent
Numerically speaking, Xiaomi said it will always keep the net profit margin tax for smart home devices, smartphones, and other hardware to five percent. If earning surpasses expectations, that money would be given back to the company’s customers via ‘reasonable means’.
Unfortunately, the company has not clarified what reasonable means in this context. If you think Xiaomi is being generous, think again. Most companies do not make a lot on hardware anyway. Even Samsung and LG make most of their money off component divisions and other brands. The smartphone market is fiercely competitive and there is not much room for profit on hardware anyway. Apple alone takes 87 percent of all the smartphone industry profits despite having a market share of just 18 percent.
Today our CEO Lei Jun announced a promise to all our fans...#Xiaomi will forever limit the net profit margin after tax for our entire hardware sales (including smartphones, IoT and lifestyle products) to a maximum of 5%.
Do you like the sound of that? pic.twitter.com/ZbEjaVeBLf
— Mi (@xiaomi) April 25, 2018
Xiaomi has always sold its hardware on a low-profit-margin. The rising Chinese giant sells most of its devices at affordable prices and has an extremely diverse portfolio of products with smartphones being just one category. It also provides services related to e-commerce, financial products, online videos, and other digital services.
Lei Jun, CEO and co-founder of Xiaomi said today:
“From the beginning, we embarked on a relentless pursuit of innovation, quality, design, user experience and efficiency advances, to provide the best technology products and services at accessible prices. We hope that our products and services will help our users to achieve a better life.”
Xiaomi is expected to go public this year and the company reportedly has a valuation of $100 billion as per Bloomberg. Chinese media outlets recently reported that Xiaomi plans a dual-IPO, which means the company would be listed in both Mainland China and Hong Kong.
Having a dual-IPO is certainly unique, but then again, so is Xiaomi.
Source: Twitter (Xiaomi)