Xiaomi expected to launch the biggest IPO of 2018
April 24, 2018 Category China News Round-up, Weekly
Chinese smartphone maker Xiaomi is expected to launch the biggest initial public offering (IPO) of 2018 as Founder Lei Jun is pondering where to list his USD100 billion company, being wooed by stock exchange officials from New York to Hong Kong, Shanghai and Singapore. It would be the biggest IPO in 2018 and the largest global one in four years. It could also make 49-year old Lei Jun China’s wealthiest individual. He has built Xiaomi from a start-up into a company with 15,000 employees and CNY100 billion in sales in seven years, producing more than 70 products under the Mi brand, including smartphones, tablets, other electronic devices and household products. The company is even considering to manufacture cars in India, and nurturing 100 start-ups in the country in five years. The company’s valuation has more than doubled from its most recent 2014 fundraising when it was valued at USD45 billion, with Lei’s stake estimated at 77.8%.
“I started Xiaomi after turning 40, and had figured out 90% of the business model before starting the project,” Lei said. He founded Xiaomi in 2010 with seven engineers, including alumni of Google, Motorola and Kingsoft. Lei Jun is motivated by the belief that Chinese manufacturers can cast off the stigma as makers of cheap, low-quality bootleg products, although it started selling its smartphones through its website only at less than half the price of its competitors. But Xiaomi’s first smartphone, the Mi 1, featured Qualcomm’s top-of-the-line Snapdragon S3 Dual Core processor, with front and back cameras, and received more than 300,000 pre-orders in the first 34 hours when it went on sale in 2010.
“We created this business model that we call “tipping”, which is to sell our hardware at zero-or-low profit margin, but monetize our complementary services. I call it the triathlete of the New Economy, where Xiaomi makes hardware and devices, sells its products through e-commerce and offers services on the internet,” Lei said. Xiaomi, which means millet in Chinese, sells its products at cost, or with a profit margin of 1% or 2%. “We sell our smartphones at affordable prices, but if you use our browser, watch streaming video on our phones, or use our online services, we earn a profit,” he said. The strategy made Xiaomi the top smartphone brand in India with a 27% marketshare.
In its Chinese home market, Xiaomi lags behind Huawei, Oppo and Vivo in smartphone sales, but the company aims to retake the No 1 spot, as it was the fastest growing seller among China’s four home-grown smartphone makers in the fourth quarter of 2017, increasing shipments by almost 58% for a 13.9% marketshare, ahead of Apple. Lei Jun has now become the elder statesman of Chinese tech investments, with both Xiaomi and his venture fund Shunwei Capital investing in an estimated 450 companies in China and overseas, the South China Morning Post reports.
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