The Wall Street Journal previously posted an unofficial profit number of 3.46 billion Chinese Yuan (MYR2 billion) out of their revenue of 27 billion Chinese Yuan (MYR15.6 billion) for the year of 2013. Now these numbers do seem believable considering the amount of sales numbers they achieved. Unfortunately for Wall Street Journal these reports turns out to be wrong. The numbers in fact turn out to be much smaller that previously thought.
According to actual reports from China Securities Regulatory Commission, Xiaomi only has profits of 347.48 million Chinese Yuan (MYR200.8 million) from its revenues of 26.58 billion Chinese Yuan (MYR15.36 billion) in 2013. This has been confirmed by a spokeswoman from Xiaomi when the financial results were revealed following the purchase of an electrical appliance company, Midea Group Co Ltd.
Due to having low-cost retail price with its high-end specifications product, Xiaomi’s reported profit margins are much thinner than what has been reported previously. It is reported that their operating margin is 1.8% only. Though, having this business strategy is what made them quickly rise into the third largest smartphone maker in the industry, trailing iPhone and Samsung.
In comparison, Samsung’s mobile division has reported that their operating margin is 18.7% in 2013. Apple, in the same time frame, has snagged 28.7% of profit margin. Even with Samsung’s decreasing sales recently, they have posted that their profit during Q3 in 2014 is US$3.5 billion (MYR12.6 billion). This poses a question to Xiaomi on whether their business model on selling at low-cost retail price with such high-end specification phones can increase their profits in the long run. In the mean time, however, they are making profits, just not as big as other market players.