Xiaomi on Wednesday took to Wuhan, China, to announce the new Mi 6X Android mid-ranger and pledge its hardware business will never have an overall net profit margin larger than five-percent. The division in question handles everything from the company's smartphones and Internet of Things devices such as smart speakers to lifestyle products including smart lightbulbs and robot vacuum cleaners. The wording of the pledge itself is meant to be inclusive of all hardware devices, meaning Xiaomi's profit margins on select product categories such as smartphones may eventually exceed five percentage points.
Should the overall margin also surpass five-percent in spite of the new promise, Xiaomi will identify ways to return the excess value to its customers, the company said, deeming the move "necessary" for the very nature of its business model that's seeking to deliver aggressively priced devices that punch above their weight in terms of specs, features, and the overall user experience they offer. "Xiaomi has the will and determination to revolutionize the industry's cost-efficiency," wrote the firm's founder and Chief Executive Officer Lei Jun. Moving forward, Xiaomi will hence continue pursuing methods of lowering the price of its products for consumers, primarily by making its operations even more efficient and using the little hardware profits it does make on various innovation investments, the executive said.
The profit margin pledge didn't encompass Xiaomi's services unit working on technologies such as artificial intelligence and apps. Given its scope of operations, that particular division may eventually be able to monetize its offerings by leveraging user data for advertising, though the current climate surrounding digital privacy stemming from Facebook's Cambridge Analytica scandal makes this an inopportune moment for trying to pursue such ambitions on a global scale. It remains to be seen how Xiaomi's pledge to never push hardware profit margins in an aggressive manner will sit with investors, especially given how the firm is now widely reported to be preparing for an initial public offering in the coming weeks and will be looking to convince the public market that it's a wise long-term bet.