Xiaomi making no profit on smartphone sales, but that is not a problem

xiaomi-headquarters

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.

source: Reuters


About the Author: Jeff Causey

Raised in North Carolina, Jeff Causey is a licensed CPA in North Carolina. Jeff's past Android devices include an HTC EVO, a Samsung Note II, an LG G3, and a Motorola Moto X Pure Edition along with a Samsung Galaxy Tablet 10.1. He currently uses a Samsung Galaxy S8 and (very rarely) a Nexus 7 (2013). He is also using a Verizon-branded Motorola Moto Z Play Droid supplied by his job. Jeff used to have a pair of Google Glass and a Moto 360 Sport in his stable of gadgets. Unfortunately, his kids have all drunk the Apple Kool-Aid and have i-devices. Life at home often includes demonstrations of the superiority of his Android based devices. In his free time, Jeff is active an active runner usually training for his next marathon, owns a Mazda MX-5 Miata, and plays Dungeons & Dragons. Jeff has three grown kids and a golden retriever.