Chinese smartphone maker Xiaomi has said its business model isn’t dependent on shifting handsets, with its financial fate instead entwined with the revenue from its smartphone and software businesses.
The company’s global vice president Hugo Barra revealed its business model during an interview with Reuters that aimed to downplay analyst concerns over its prospects. Xiaomi missed its global smartphone target by 12% last year, while its third quarter smartphone sales slumped 45%, according to research outfit IDC, revealing a reversal in fortunes from its time as the world’s most valuable start-up in 2014.
Keen to reassure observers that the technology maker’s future is safe, Barra stressed that Xiaomi’s business model is not reliant on handset sales, adding that it is essentially giving away its smartphones “without making any money,” because ultimately it “cares about the recurring revenue streams over many years” rather than the immediate margins on hardware.
“We could sell 10 billion smartphones and we wouldn’t make a single dime in profits,” Barra added.
Instead, the business, which shares little of its profit and revenue figures, is prioritising its smart home technology sales alongside its software arm. In April, the company’s vice president Liu De revealed the firm predicts sales of smart home devices to double to 10 billion yuan ($1.5bn) this year.