Second, traditional CE companies tend to spend a lot of time perfecting their products before they launch them. In contrast, Xiaomi believes that "speed is everything for consumer electronics," Li said. "We launch our products first, then, optimize them based on the feedback we get from our users." He added, "I tell our engineers that users are your product manager."
Inside Xiaomi co-founder/president Bin Lin's office -- complete with Xiaomi's own 47-inch TV, and a whole bunch of stuffed bunnies. Xiaomi's mascot is a bunny wearing an Ushanka with a red star and a red scarf around its neck.
(Source: EE Times/Junko Yoshida)
Bringing down BOM
To be clear, Xiaomi isn't a vendor of cheap knock-off smartphones. It takes pride in offering high-end phones at the rock-bottom price.
But if Xiaomi keeps sourcing high-spec parts and components from suppliers, how could the company afford to price its handset so low? Is that a sustainable business?
Xiaomi typically keeps its phone production in a series of smaller batches, and launches them over the Internet. Presumably, between these batches, the company continues to perfect its new product, and possibly, bring down the cost. Sometimes, it also upgrades its parts by switching suppliers.
Between the announcement of Xiaomi's M1 in July 2011 and a Beijing launch event a month later, Xiaomi reportedly upgraded its CPU from a 1.2GHz dual-core chip to a Qualcomm MSM8260 SoC.
This made the M1 the first Chinese phone with a 1.5GHz dual core chip. To this day, Lin said, "We are probably the biggest buyer of MSM8260 chips for a single product."
The M1, featuring Qualcomm's Adreno 220 GPU, 1GB RAM and a 4GB ROM, was initially priced at 2,600 Yuan, but by the time it was unveiled in Beijing, the company had cut the price to 1,999 Yuan (roughly US$270 at that time, according to Lin), below the BOM, Lin recalls.
Xiaomi's M2, launched in the summer of 2012 with a BOM of 2,300 Yuan was also priced at 1,999 Yuan.
Known in China as the Hongmi (which means "red rice"), the dual-SIM 3G Redmi sporting a 4.7" IPS display is a mid-range smartphone at a lower price. The Redmi became the handset Xiaomi has officially made available outside of China. It's available in Singapore and is set to retail online in Malaysia.
The Redmi, featuring MediaTek's quad-core 1.5GHz MT6589T processor, has a BOM of 890 Yuan. The finished product is now on sale on the Internet at 799 Yuan (roughly US$130), according to Lin.
Xiaomi prefers a longer product cycle, thus generating much larger volume and presumably reducing cost in the long run.