Xiaomi’s billionaire co-founder has a business mantra: don’t be greedy

Apple's iconic 1997 advertising campaign had the slogan, “think different.” Alphabet, Google's parent, exhorts its employees to “do the right thing.” In its early years, Facebook wanted its developers to “move fast and break things.”

Xiaomi, often known as China's answer to Apple, is doing a bit of all of the above, guided by one philosophy: don't be greedy.

“We must curb the tendency for greed and win absolute trust from consumers,” Lei Jun, 48, the Chinese smartphone and gadget maker’s billionaire co-founder and chief executive, said in an interview with the South China Morning Post at Xiaomi’s Beijing headquarters.

By that he means thinking differently about how the company makes its money – by selling its hardware cheaply. Instead of marking up, he wants to steer the company to focus on profits from higher-margin, fee-based internet services.

“What I want to achieve is that when consumers buy the product, they can close their eyes and buy,” Lei said, knowing that “it’s absolutely of high quality and absolutely at a very low price.”

“I think we may write this into the company charter, that we will not, in perpetuity, exceed a certain number of percentage points in profit on our hardware. Our target is just this one or two percentage points,” he said.

But if lowering hardware cost is the right thing to do for customers, Lei must also make sure that it sounds right to hard-nosed institutional investors.

The company is targeting an IPO in Hong Kong later this year, which could be the world’s biggest technology listing of 2018, people familiar with the matter have said. (Lei declined to comment on whether the company was seeking an IPO.)

Some analysts aren't entirely convinced of Xiaomi’s emphasis on revenues generated from its service and software.

“Xiaomi considers hardware a means to an end, with the aim of being an internet company and making money from services,” said Kiranjeet Kaur, Singapore-based senior research manager at IDC.

“However, at present making money on hardware to stay afloat may be very crucial too to survive in this environment before the ecosystem starts to pay off.”

Established in 2010, Xiaomi at one time was the world’s most valuable private start-up, worth more than US$46 billion at the end of 2014.

In India, the world’s second largest smartphone market, Xiaomi shipped 8.2 million smartphones during the fourth quarter of 2017, giving it a 27% market share and vaulting it to No 1, according to research firm Canalys.

Xiaomi’s rise in the country ended the six-year reign of once-formidable South Korean rival Samsung Electronics.

But at home, Xiaomi has lost its position as the top selling smartphone brand to rivals Oppo and Vivo, a title Lei wants to regain within 10 quarters.

Xiaomi has moved fast, but it remains to be seen if it can claw its way back to the top.