Xiaomi became popular thanks to its phones which are affordable and offer great value for money. However, things have gradually changed for the company. This year, it (and its other brands) has released 44 non-phone products, four times more than the number of phones released within the same period. By the end of the year, we foresee this figure will have tripled.
They might have started as a phone company but in the past few years, it has grown to become a large ecosystem with products spanning different categories. It not only sells hardware but also services for these products and a platform for them to connect to each other.
Xiaomi makes very little profit from the sale of its phones. Last year’s financial report revealed the company’s major revenue was from internet services and ads. With the smartphone market declining, it makes sense as to why Xiaomi and Redmi are not focusing on mobile devices alone. Having a diverse portfolio is sort of an unwritten rule for large corporations and in a case where one arm of the business might be doing poorly, the others might make up for that.
With the current business model, Xiaomi can keep growing its user base even through non-phone products. There are lots of households that might not have a Xiaomi phone but have a Mi TV, Mijia air filter, Mijia projector, or Mijia air conditioner. Since most of its household appliances products are smart, owners automatically get plugged into the Xiaomi system.
In trying to grow its user base, Xiaomi has modified how it sells products to consumers, from being online-only to including physical stores where prospective buyers can go to get hands-on experience with a number of its products. However, it still struggles with supply issues when it comes to its mobile phones.
Xiaomi has done very well for itself in a short span. The Chinese giant currently has the largest IoT platform in the world and it is not resting on its oars. Last week, it restructured its semiconductor business which resulted in the formation of a new company that will focus on the development of AI and IoT chips for use in its products. Songguo, its original semiconductor business will continue to focus on mobile processors.
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However, there are opinions that Xiaomi’s current business model doesn’t mean it is not susceptible to failure. A lot of people still purchase non-smart home appliances and that segment of the market isn’t declining as predicted. There are also concerns that other mobile manufacturers can replicate its business model or even go into partnership with already established home appliances manufacturer to challenge Xiaomi.
(Source)
