Why Xiaomi is worth $46 billion

All about this Chinese Giant

Why Xiaomi is worth $46 billion
February 5, 2015

Quick: Name the three largest manufacturers of mobile devices in the world. Samsung Electronics Corp and Apple Inc., the top two, are pretty easy given the popularity of the Samsung Galaxy and Apple iPhone lines. However, most people would probably have a hard time coming up with number three: Xiaomi Corp. And, Americans who know of it probably can’t spell it or pronounce it!

In just five years, this Beijing-based company (pronounced like “shower-me”) has morphed from a startup producer of mobile phone software to a global giant that is nipping at the heels of its better-known competition for pre-eminence in the cutthroat world of mobile device manufacturing. Last year, Xiaomi —the Chinese word for millet — sold more than 61 million mobile phones worldwide, an increase of more than 200 percent over the previous year, and sales revenue doubled to $12 billion. In comparison, Samsung sold just over 299 million mobile phones and Apple sold just over 150 million mobile phones in 2013 (the most recent year for which statistics are available).

High Valuation and Profitable

However, the most astonishing Xiaomi number is 46 — as in the company’s current market valuation of $46 billion. This valuation was announced by the company in December after a $1.1 billion round of funding, making Xiaomi the world’s most valuable technology startup. It is also the highest-valued IT firm in the world that has yet to go public. And, unlike many tech startups, Xiaomi actually earned a profit last year: $56 million.

This valuation also puts Xiaomi at the top of the list of high profile, venture-backed startups that includes Uber ($41 billion), Airbnb ($10 billion), Dropbox ($10 billion), Square ($5 billion) and Pinterest ($4 billion).

Xiaomi introduced its first smartphone, the Mi1, in 2011 and followed this up with the Mi2 in 2012. In 2013, the company opened its first retail store in Beijing (think a Chinese Apple store), although the vast majority of its sales are made online, and the Mi3 phone. Last year, Xiaomi rolled out its Mi4 and Redmi Note smartphones.

In addition to mobile phones, Xiaomi also designs, develops and sells tablet computers, mobile apps and consumer electronics like television set-top boxes and TVs with Internet connectivity. More than 5,000 employees work for Xiaomi in China, Malaysia, Singapore, India and the Philippines and future expansion is planned in Indonesia, Thailand, Russia and Brazil, among other countries. The company was founded and is run by CEO Lei Jun, who is number 23 on the list of the richest people in China.

Apple Comparisons

Xiaomi has often been compared to Apple, with some critics even accusing the company of copying the design and style of Apple products. In addition, Xiaomi relies heavily on social media and positive word-of-mouth by its “cult” of fans that is somewhat similar to Apple fanatics to drive sales, doing no traditional advertising.

CEO Jun has even adopted kind of a Steve Jobs persona, wearing jeans and dark shirts and announcing new products at Apple-style media extravaganzas. When the new Mi4 phone was announced, the presentation even included Apple’s iconic “one more thing…” which rubbed many Apple enthusiasts the wrong way. It was the only slide in English in the entire presentation.

Billionaire investor Yuri Milner, who was an early investor in Xiaomi, recently stated that he believes the company has the potential to join Alibaba Group Holding Ltd. and Facebook Inc. in the $100 billion valuation club. Milner was also an early investor in these two companies. Xiaomi’s stated goal is to sell 100 million mobile phones in 2015.

Only time will tell if Xiaomi’s current $46 billion valuation is realistic or not. If the company’s rapid rise in just five years is any indication of its potential, though, Xiaomi is certainly a business worth keeping an eye on.

Photo ©iStockphoto.com/YongyuanDai

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