Chinese handset maker Xiaomi has seen explosive growth since entering the market in 2010, emerging to become the world’s third-largest smartphone maker after just four years. According to a recent regulatory filing, the company is also profitable too, bringing in $56 million profit in 2013 despite having razor-thin margins on its smartphones and tablets.
Reuters received confirmation from a Xiaomi spokesperson that the regulatory filing is accurate, although it does not account for the company’s entire business. Xiaomi, valued at over $10 billion following a recent funding round, posted revenue of 26.6 billion yuan alongside an incredibly low operating margin of just 1.8%.
“They’re growing so fast and so lean, I wouldn’t be surprised even if they were losing money,” said Forrester Research analyst Bryan Wang. “The current market is so competitive that I don’t think it’s sustainable without consolidation.”
Xiaomi operates with a business model that focuses less on traditional marketing and high profit margins in an effort to push its software and services into the hands of as many consumers as possible. While this method has proven profitable in the short term, whether Xiaomi can make sustainable profit based on low margins has reportedly been highly speculated in the tech industry.
Reuters adds that all handset makers except for Apple and Samsung are likely to feel the pressure from Xiaomi as they continue to push an affordable device lineup in emerging markets like China. Xiaomi plans to expand its footprint in Asia and Europe, but recently suffered a major blow as a court order forced the company to pull its smartphones from sale in India following a patent dispute.
Xiaomi has earned itself the tagline of “Apple of China” for blatantly copying the look and feel of products like the iPhone and iPad. “I’ll stand a little bit harsh, I don’t see it as flattery,” said Apple design chief Jony Ive a recent interview with Vanity Fair. “It is theft and it is lazy. I don’t think it is OK at all,” he added.
Xiaomi has a lofty goal of topping Apple and Samsung as the world’s largest smartphone maker within the next decade.
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