xiaomi

Xiaomi claims it’s a services company, but it’s really not

As Stratechery pointed out, it’s conventional wisdom that Xiaomi is an Internet services company. That selling smartphones at break-even prices is merely a gateway for selling profitable services. Except this might all just be a marketing ploy, because Xiaomi does make money from hardware, and quite a lot of it.

As much as 92% of Xiaomi’s 3.46 billion yuan profit (or $566 million US dollars) is from hardware. That’s profit, not revenue.

Let’s start with how Xiaomi’s CEO, Lei Jun, describes the company:

We’re actually an Internet company. We’ve already got a business in mobile phone hardware and we want to add to that an Internet platform. We can earn money from that, once it’s established. People just don’t get it. The mobile phone itself is only the carrier. Microsoft used to sell Windows in a box with a CD in it. Does that make Microsoft a paper box company? The box and the CD are only the carrier. If people don’t understand this, they can’t understand [Xiaomi].

Wouldn’t Microsoft be a paper box company if paper boxes actually generated 92% of its profit? If people cared more about the paper box than whatever’s inside?

An Internet company might be what Lei Jun wants Xiaomi to be one day, but right now it’s squarely a smartphone company.

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Apple, Xiaomi and OnePlus should adopt this alternative pre-order system

My OnePlus One review and the nine customizations I recommend for it are among the most popular posts on this blog. It’s easy to see why. Even with the all the new phones coming out for the holidays, the OnePlus One remains one of the best phones you can buy. If you can stomach not being able to take a phone into a store nearby for customer service, the One’s combination of power, price, aesthetics and software is nigh unbeatable.

So of course I noticed that OnePlus is moving from an invite to a pre-order system, similar to how you’d pre-order an iPhone or Xiaomi. People must log on the moment the system opens up and it’s a mad scramble to be among those who click nanoseconds faster than others.

To no one’s surprise, the OnePlus One pre-order page went bust when it opened to spike in traffic earlier this week. To think that it’s enough to merely double server capacity is naive!

Anyway, I hate the whole system. It’s not consumer friendly and it’s not company friendly either. Here’s how I would have done it.

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Starting a phone company? Here’s a blueprint for success

Xiaomi and OnePlus proved that it is possible to start a successful smartphone company, even with limited resources. Here’s their strategy in a nutshell:

  1. Create a compelling product for tech enthusiasts
  2. Sell it direct as a loss leader
  3. Limit production to create scarcity
  4. Build awareness and demand
  5. Sell profitable related products and services
  6. Scale production once component costs drop

Small Chinese companies like Xiaomi and OnePlus were able to create markets even while competitors like Apple and Samsung spend billions in advertising their smartphones. Their success is a blueprint for others to follow, whether you’re running an established smartphone company or starting one.

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You can’t get a better smartphone for the price; too bad you can’t actually buy it either

I had an HTC One before it was unfortunately stolen out of my gym bag. I needed an Android phone, didn’t want to spend much on a replacement as I already carried an iPhone 5S and so got the inexpensive Moto G. An excellent phone for the amount I paid.

Price was certainly an important variable, so when the One Plus One was revealed it caught my attention in a big way. This is a phone with the internals of a Samsung Galaxy S5 but with the amazing price of $300. Wow! The company can’t be making much money at those prices.

But if it’s too good to be true, that’s probably because it is. In the case of the One Plus, the problem is that it’s almost impossible to actually buy.

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