How is Xiaomi able to sell such cheap phones with moderate specs and still be in business?


How is Xiaomi able to sell such cheap phones with moderate specs and still be in business?

In: 4

Now there are two different business models you need to understand. Xiaomi believes that you shouldn’t make 100% or more on your device on top of what the device actually costs, and you should make some money but not have to pay for the name. They make money by selling more devices overall.
Companies like Apple work a different way, an iPhone 14 costs about $500 or less to make but you pay $999 to buy it. So you pay a lot for the name on the device and not for the device itself.

So they stay in business by charging you the real price of the device without charging for the name.

They dont make profit, thats how.
Apple takes home about 80% of the total profits from global smartphone sales, all the other companies combined share the other 20%.
The only reason people buy from brands like xiaomi is the price, if they tried to make big margins like apple nobody would buy it anymore.

Apple relies on high margin/low volume to make their money. Android manufacturers generally relies on other avenues to make money, relying on high volume/low margin and ancillary sources of profit like advertising. Some do make money off of higher margins, but really only Samsung can compete on that end. Everyone else is on a low margin/high volume model. Then you got Google who doesn’t particularly care about the sale of devices, they care about the data from the platform.

Also, you need to keep in mind that the general strategy from Chinese manufacturers has been to undercut competition via subsidies or lower regulation from the CCP government. I don’t know if Xiaomi is doing this, but there have been numerous other examples spread out over the last few decades. Huawei made bank off of undercutting Lucent and Cisco for networking equipment. The CCP heavily subsidized the solar cell (and green energy) industry and put a lot of non-Chinese firms out of business. They’ve made concerted efforts to make sure that they keep rare earth materials prices low to prevent mines in other countries from operating profitably. Biggest example was a few years back when they flooded the market right before a mine in the US re-opened and it had to close down shortly after because they could not operate profitably.

Easy: government cheese and subsidies, 100% tax rebates for factories located in special economic tax free zones, integrated 100% local supply chain, and know-how from skimming talent and IP/technology learned from decades of manufacturing. They make toothbrushes to electric cars and can’t fail because it is a state enterprise masquerading as a stock listed company.

The cheap phones could possibly be a loss leader for them, and really are dirt cheap for the performance given.

they get deals from factories for parts, which dictates of what the phone will look like. Who is able to react the fastest?