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Leonid Bershidsky

Xiaomi's Killer App Is Its Business Model

Xiaomi's newly revealed financials show that "build it and they will come" can be a refreshingly effective approach.

Xiaomi Corp., the private company that sells the most smartphones in China, was until recently shrouded in mystery: It wasn't clear how it could make money by selling top-of-the-line products at rock-bottom prices. Xiaomi has revealed its 2013 financials, and they show a handsome profit, which means smartphones from Apple, Samsung and even LG and HTC may be grossly overpriced.

Xiaomi's flagship phone, the Mi4, sells for a minimum of $327. Its specifications are largely the same as, say, the Samsung Galaxy S5's, which costs at least $150 more. The Chinese maker doesn't skimp on component quality to drive down the price: It uses the same Sony battery and optical sensors, Qualcomm processor, Wi-Fi and audio chip, Samsung RAM chip and other parts found in premium smartphones. Xiaomi phones don't look or feel cheap, though their design is minimalistic. The Mi interface, with its highly intuitive, native-feeling and iOS-like Android flavor, doesn't display the bloatware that characterizes the phones of other manufacturers.