Taipei Times (TT): Last year, Xiaomi Technology (小米科技) sold 400,000 smartphones, which is a stunning start to sales in the Chinese market in such a short period of time. What is Xiaomi’s business outlook for this year and are you considering an initial public offering (IPO)?
Lei Jun (雷軍): On Jan. 11 we launched an online subscription campaign that required buyers to pay in advance and we sold 500,000 units in 36 hours. After that, we launched a version that supports CDMA technology and we received 150,000 orders in just 25 minutes of pre-sale activity, as well as an order of 1 million units from China Unitcom Ltd (中國聯通).
Normally, a top handset brand such as Apple Inc or HTC Corp (宏達電) sells 50,000 phones a day on average in China. Our sales figures are the envy of the industry. Based on this growth momentum, we aim to sell about 4 [million] to 5 million units this year, and that is a very conservative forecast.
Xiaomi is less than two years old and it is still a small company. It is too early for us to launch an IPO at this time. We have about US$100 million in capital after three rounds of fund-raising and with such healthy cash levels, we have no plans to launch any new fund-raising initiatives at the moment.
TT: Given that US handset chipmaker Qualcomm Inc is an investor in Xiaomi, would your company consider sourcing chips from different firms in the medium-to-long term? [Qualcomm invested US$1 million in Xiaomi]
Lei: With Qualcomm’s high-quality handset chips, Xiaomi has been able to out-perform its peers in just two years. We have to credit Qualcomm for this. Xiaomi has become one of Qualcomm’s top three customers in China and all our handsets are fitted with Qualcomm chips.
TT: What is the company’s product strategy?
Lei: Currently we only sell one model with one price. We only sell high-end products with units priced at 2,000 yuan (US$315), which is the lowest price in China for a high-end mobile phone.
We do not sell low-priced phones because we are working with some of the world’s top handset contract manufacturers and component suppliers. For instance, we purchase displays from Japan’s Sharp [Corp] and Toshiba [Corp]. Taiwan’s TPK [Holding Co (宸鴻)] is our touch module supplier, while Lite-On Technology [Corp (光寶科技)] supplies camera lenses for us, and Inventec [Appliances Corp (英華達)] and Foxconn [International Holdings Ltd (富士康控股)] assemble the phones for us.
TT: Will Xiaomi look to expand to overseas markets such as Taiwan? If so, would your firm seek to team up with local telecoms operators or would yo sell your products directly?
Lei: Xiaomi will focus on the Chinese market for the time being. We might consider gradually expanding overseas when we launch our second-generation handset and we would have to weigh the possible business models — to work with telecoms companies or sell the phones via a retail network.
Currently Xiaomi handsets are only available on the Internet, except for those sold to telecoms companies in China. Collaboration with telecoms operators is one of the most important approaches for driving the company’s growth in the long run.
TT: Is it possible for Xiaomi to offer smartphones that run on operating systems other than [Google Inc’s] Android?
Lei: What we are seeing is the blurring of lines between handsets and computers. This offers a good business opportunity for us. We hope Xiaomi handsets can run different operating systems and we are in talks with Microsoft [Corp] to launch phones supporting its Windows system.
TT: How does Xiaomi turn a profit: by selling handsets or mobile applications? And do you have any plans to create your own app store?
Lei: We hope to make our profits through offering services, rather than selling hardware. However, in order to achieve this goal, we first have to boost our number of users by offering high-performance handsets at an affordable price. So our business model is more like [Amazon.com Inc], which sells books and services through its Kindle e-readers. For us, handsets are devices through which we can offer services and mobile applications to our customers.
We equip our handsets with MIUI, which is an Android variant customized for the Chinese market. We believe this system will help boost the usage of our products and services, such as our MiTalk Messenger.
We plan to increase our MIUI team by four-fold this year to develop new applications, and we probably will have our own app store in the near future.
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