Xiaomi will limit its profit margin below 5%: CEO Lei Jun
Xiaomi aims to increase its customer base by driving cost efficiency and offering products at a competitive price range
Mumbai: Chinese electronics and mobile manufacturer Xiaomi will limit its profit margin on hardware, which includes smartphones, internet of things (IoT) and lifestyle products, to below 5% as the company aims to increase its customer base by driving cost efficiency and offering its products at a competitive price range.
Cost efficiency is at the heart of business competition, and a 5% limit on our overall hardware net profit margin is evidence of our high cost efficiency, Xiaomi’s chairman and chief executive Lei Jun said in an email to the company’s employees.
“Quality products with honest pricing are two inseparable concepts, and is the best way to repay users’ trust," Jun said in the email, a copy of which has been reviewed by Mint.
“If the margin crosses 5%, then we will find a way to return the excess above 5% to our users," Jun added.
Xiaomi offers a range of products which include smartphones, powerbanks, air purifiers, smart televisions, notebooks, smart devices, speakers and headphones.
“If we sell our products at close to cost and return value to our users, then we can earn the long-term support of our users," Jun said in the email, adding that the company’s plan to aim for large volumes with small profit margins will still result in suitable hardware profits in the long term.
Xiaomi, which launched its latest smartphone Mi6X on Wednesday in Wuhan, China, overtook South Korea’s Samsung as the smartphone market leader in India during Q4, 2017.
Xiaomi consolidated its lead in the Indian smartphone market with a 31.1% market share (in terms of shipment) during the first quarter of 2018, according to the latest report by Counterpoint Research, a Hong Kong based research firm.
The report attributes Xiaomi’s success to a series of new smartphone launches in the budget segment.
Samsung and Xiaomi together accounted for 58% of the total market share in India, the Counterpoint report added.
“Going forward, maintaining reasonable profits is an inevitable industrial trend," Jun said, adding that any move pushing for high gross margins however will eventually reap no rewards.
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