Inkstone
    Apr
    18
    2018
    Apr
    18
    2018
    A Chinese tech bigwig wants to make gadgets that are cheap AND good
    A Chinese tech bigwig wants to make gadgets that are cheap AND good
    BUSINESS

    A Chinese tech bigwig wants to make gadgets that are cheap AND good

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    by
    Eugene Tang, Chua Kong Ho and Yingzhi Yang
    Eugene Tang,
    Chua Kong Ho and
    Yingzhi Yang
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    Picture something made in China.

    If what you saw was cheap but poorly made  – then this Chinese techie would like to prove you wrong.

    Lei Jun, CEO and co-founder of Xiaomi, best known as a smartphone maker, is convinced that he can build a consumer products empire that creates everything from pens to neck pillows: and everything will be both affordable and well-made.

    Talk is cheap, but investors are unlikely to dismiss Lei's goals as lofty.

    In fact, bankers are set to value his company at a whopping $100 billion when it goes public later this year, a person familiar with Xiaomi’s IPO plan told the South China Morning Post.

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    By way of comparison, Facebook had a valuation of $104.2 billion when it went public in 2012.

    Group 5
    What’s the problem with ‘made in China’ products? They’re very, very cheap.
    -
    Lei Jun, CEO of Xiaomi

    That valuation would make Lei the richest person in China. His stake in the company is estimated at 77.8%.

    Chinese manufacturers have struggled to shake off their image as makers of cheap but shoddy products.
    Chinese manufacturers have struggled to shake off their image as makers of cheap but shoddy products. Photo: Reuters/Carlos Barria

    (Poorly) made in China

    Lei founded Xiaomi “to solve why Chinese goods aren't done right,” he said in an interview with the South China Morning Post.

    He said that a many Chinese products are low quality because manufacturers – and customers – cared most about price.

    “What’s the problem with ‘made in China’ products? They’re very, very cheap,” he said.

    He gave pens as an example as something poorly made that people put up with because they cost just 16 cents.

    “They drive out the better stuff,” he said. But, he points out, “if Chinese consumers didn’t have the demand, no good pens would exist.”

    (Xiaomi makes a ball pen that sells at $1.60, featuring Japanese ink and Swiss-made refills.)

    Xiaomi makes everything from smartphones to robot vacuum cleaners.
    Xiaomi makes everything from smartphones to robot vacuum cleaners. Photo: Xiaomi

    The Xiaomi way

    It’s only natural that consumers seek affordability, and Lei doesn't challenge that.

    “Xiaomi’s great innovation,” according to Lei, is that its gadgets are of the same quality of its competitors, but sold at half the price. It sells its products at cost, or with a profit margin of 1 or 2%, he said.

    Lei is seeking a business model that leans heavily on e-commerce and services.

    “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.

    Xiaomi is sometimes described as “China’s Apple,” because of the similar aesthetics of its products.

    But Lei would like to you know that his company takes inspiration from Costco, too.

    EUGENE TANG
    EUGENE TANG
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    Eugene Tang is a contributor to Inkstone. He is the Business Editor of the South China Morning Post.

    CHUA KONG HO
    CHUA KONG HO
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    Kong Ho is a contributor to Inkstone. He is the Technology Editor of the South China Morning Post.

    YINGZHI YANG
    YINGZHI YANG
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    Yingzhi is a contributor to Inkstone. She is a China tech reporter for the South China Morning Post.

    EUGENE TANG
    EUGENE TANG
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    Eugene Tang is a contributor to Inkstone. He is the Business Editor of the South China Morning Post.

    CHUA KONG HO
    CHUA KONG HO
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    Kong Ho is a contributor to Inkstone. He is the Technology Editor of the South China Morning Post.

    YINGZHI YANG
    YINGZHI YANG
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    Yingzhi is a contributor to Inkstone. She is a China tech reporter for the South China Morning Post.

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