Wednesday, December 17, 2014

Overhype Xiaomi?

Recently, I came across a report that says that Xiaomi net profit for 2013 is $56m on sales of $4.6b.This is a razor thin margin of 1.8% compared to APPLE (28.7%) and Samsung (18.7%).This probably explain why Xiaomi is able to price their phones so low in the market.

Recently Xiaomi expansion into its second most important market (India) stalled only after starting in July. Complaint by Ericsson that Xiaomi had infringed on its set of wireless patents which will see hearing in Feb 2015.Meanwhile, sales activity in India has to be halted until the outcome become clearer. Xiaomi had only a handful of patents (as it is a startup) compared to the likes of Apple, Samsung,Ericsson and even locals rivals like Huawei, Lenovo etc.I do not forsee how Xiaomi is going to be able to sell in Europe and US. Even its foray into markets like India and Indonesia will prove to be difficult (due to patents suits being lodge by competitors) despite the attractiveness of its price points.I was in Indonesia recently and was surprised to see OPPO quite visible in the local market.In India, there is also the local version of Xiaomi in the form of Micromax.

Founder, Lei Jun is in the midst of trying to raise funds for the company at a valuation of $40b based on his vision of a digital ecosystem.

I am of the opinion that Xiaomi is more hype than substance till this point.

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