AH Primetime: Xiaomi, The Methods behind the Madly Low Prices


First off, who is Xiaomi, and what is their claim to fame?  Xiaomi is a Chinese smartphone manufacturer, with their name on some of the most popular devices across all of Asia.  Some folks may remember that one of Google's big names, Hugo Barra, moved to Asia to work for Xiaomi back in late summer of 2013 as head of global expansion.  The company has been an upstart since the start, with its founding crew containing many ex-Google employees


Xiaomi's first device, the Mi 1, when it was released, competed directly with Apple's newest, the iPhone 4, but at an interesting level: price.  The two phones were similar in specifications to leave those as 'the same', but while the iPhone sat proudly under its 4,999 yuan (~$800 USD), the Mi 1 sat happily with its 1,999 yuan (~$324 USD) label, for all to see.  How did Xiaomi, a relatively new company at this point, manage such a pricing feat?


The devices themselves, nowadays, are not excessively pricey to make for Xiaomi.  The company's latest flagship, the Mi 3, which touts a full 1080 by 1920 full HD screen, 1.8 Ghz quad-core processor, and a 13-megapixel camera, costs the company $157 to manufacture.  'What about the profit?' you may be asking.  With each of these devices sold, the company makes roughly $100 in profit.  Similarly, Xiaomi's Hongmi device, lower in specification ranking, costs the company roughly $86 with the retail pricetag being about $113, which is less profit in comparison, but profit nonetheless.


How then do they make themselves so cost-efficient as a modern company?  Xiaomi doesn't have a lot of physical presence in Asia, in the shapes of storefronts or booths or what have you.  The company tends to do a large majority of its business over the Internet, leaving the need to build, staff, maintain, and manage physical storefronts out of the picture entirely.  Using its own website as a marketplace, as well as a site called Tmall.com, which is one of China's largest online retail stores.  Xiaomi doesn't deal exclusively in devices and services though; the company also offers headphones, t-shirts, and miniature figures of their adorable rabbit mascot.  Much of their 'talk of the town' reputation is done through promotion by themselves, and others, on social media, along with the press


But how on earth do they manage to keep themselves afloat if they rely on themselves and their supporters for sales?  Limited quantity production.  Xiaomi is not a conventional company that pumps out device after device, to be put in boxes, shipped wherever, and await a sale that may not happen; they instead have done limited-production runs for their devices.  The Mi 3, launched in October of 2013, had only 100,000 units available immediately, with another 100,000 to come the next week.  Both times the devices old out in a matter of minutes.


These limited runs of devices must take a chunk out of profits, though.  They sometimes keep lusting customers at ay for weeks or even months before actually receiving the chance to buy one of these hot pieces of tech.  How do Xiaomi manage to make profit when they aren't selling devices or merchandise? The answer comes in the form of theme.  Not a motif or underlying message theme, but a theme or style for the device itself, on the software-level.  If you buy a device, you often have to get a non-stock launcher, find a compatible icon pack, and apply it, sometimes costing money, and almost never affecting the device past the home screens and app drawer.  Xiaomi are now famous for their theme store, which sells themes that lucky owners of their devices are able to buy themes to apply, and they affect the whole phone, because the themes are sold directly from and through Xiaomi itself to the user.


And where will Xiaomi go in the future?  Well, with their roots heavily in Asia, along with much of their fanbase and usership, the company reportedly has plans to expand the number of devices it makes per year, with the aim of 60 million smartphones for this year, and having sold 11 million in the first quarter alone.  Will Xiaomi bring itself to global market eventually?  Yes, and sooner than expected, most likely.  Xiaomi has reported that it has plans to expand its market into 10 new countries this year, with Brazil, Russia, and some Southeast Asian countries on the roster.  The Xiaomi craze is growing with each passing day and device, and our trusty ex-Googler Hugo Barra, now the company's vice president, has suggested that perhaps one day, Xiaomi will bring its market and strategy to the United States.


Xiaomi is a company of humble beginnings, and humble operations present-day.  Their fuel of choice is support and good social media press.  The costs of their devices remain low as the appeal of these devices only grows.  This company is one of interest to many competitors, who have also begun implementing its strategies for success, obviously proven already to be excellent.  Xiaomi leads, just not in price tag.

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About the Author

Phil Bourget

Staff Writer
Using Android since 2012 and the Galaxy S III, I'm now running a Nexus 5 paired to a Moto 360 to keep updated on the Internet of stuff. Usually found on Google+ or in class.
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