Xiaomi is not very profitable – Reuters

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This bit of news will interest people who have participated in intense debates about Xiaomi‘s profitability despite their swift rise to dominance in the last few years. The third largest smartphone maker reported a profit of only $56 million profit in the year of our Lord 2013. For a company valued at more than $10 billion, that is an extremely thin margin. This was reported by Reuters.

Here is a comparison of profit margins by Reuters:


Samsung’s mobile division reported an operating margin of 18.7 percent last year, whereas Apple reported 28.7 percent for the business year ended September 2013. LG Electronics Inc’s (066570.KS) mobile business posted a margin of just 0.5 percent.

Reuters says Xiaomi’s $56 million profit for the specified year is a mere 1.8% margin. Not so flattering. Is Xiaomi’s current game plan sustainable? Shall we be seeing a change in strategy by the Chinese firm soon?


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2 comments

  1. I wouldn’t know if they have a game plan at hand but when you figure in the drop in Samsung profit, that could be a gain of its own. How about a game plan where they first wrestle the market from Samsung and every one can sit back and adjust for profitability?

    The idea could be to destroy the market for Samsung so that Samsung may pull out of some segments and concentrate in some areas rather than dominating in every segment, allowing Xiaomi more room to operate and some volume sales that will improve their profits. I think that could be the game plan. First, they make people realize that they can deliver quality at reduced price, even if at a loss or not making much profits and once people begin to associate their products with quality, the sales will start coming, even at a slightly improved pricing.

  2. A long term risky game plan, if so.

    Customers are fickle. If they move to You because of competitive pricing, they wo
    uld sure dump you once you scale up.

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