Xiaomi is a very interesting company with a very interesting business model.
The vast majority of phone manufacturers around the world create a smartphone with a cost of around $100 and then they spend a huge amount of money on marketing and branding. The company then believes that the smartphone has a much higher percieved value – so they sell it for $400 or above.
Xiaomi doesn’t do this!
Xiaomi is aiming to sell all of its products as close as possible to their costs – as they want to have as many products available in the world as possible.
Once out in the world and being use – Xiaomi then looks to drive revenues from providing software and services around these products, which has a much higher margin that the hardware itself. Thus, driving higher demand, more product adoption and thus more revenues from services.