With big smartphone players like Samsung and LG dropping the ball on some high profile products this past year, the door seems to be opened for other players to jump in and establish a strong foothold in the smartphone market. One of those companies may have been Xiaomi, which received a lot of press in 2014 when it was valued at $46 billion during a round of fund-raising. However, Hugo Barra revealed in a new interview that the company is not making any profit on smartphone sales and is actually focused on other connected devices and their software services and ecosystem to help make the company profitable.
In an interview with Reuters, Barra noted that “we’re giving [handsets] to you without making any money…we care about the recurring revenue streams over many years.” If this business model sounds familiar, it should, since it is basically the same as what Google does with their Android operating system. With a solid history under their belts, Google has recently started to look to making profits from phones via their new Pixel phones. Unlike Google, Xiaomi may not have the depth of the giant search firm to help drive continued business success though, which has caused IDC to question the value of the company.
Xiaomi Vice President Liu De says the company is working on doubling sales of smart home devices and expects to see that number jump up to 10 billion yuan ($1.5 billion USD) this year. Many of these devices are home appliances, even including a connected rice cooker.
Thus far, Xiaomi has been focusing on Asian markets, but they are poised to attempt entry into the U.S. market. Xiaomi is planning to launch a new product at the Consumer Electronics Show in Las Vegas in January and they have plans to release a smartphone compatible with U.S. cellular networks.
Despite the opportunities that are out there, the lucrative U.S. market is proving to be a tough place to enter. LeEco recently discovered this as revealed by cash problems the company is experiencing amidst a major push into the U.S.