Xiaomi's smartphone Mi 4i are displayed in Taipei, Taiwan, May 7, 2015. (REUTERS Photo)
Associated Press
Xiaomi, a Chinese startup that helped pioneer the trend toward ultra-low-priced smartphones, is preparing for what would be the biggest initial public offering since e-commerce giant Alibaba's in 2014.
The 8-year-old is a star among the Chinese unicorns, a term that refers to startup companies that are valued at more than $1 billion (roughly Rs. 6,786 crore). It has a dedicated Chinese fan base and its media-savvy leader is an Asian celebrity. But it is untested outside the region.
Can a Chinese company be cool outside Asia? Can Xiaomi achieve its goal of expanding beyond hardware to be an Internet service company?
A guide to Xiaomi and its upcoming IPO in Hong Kong:
Where did Xiaomi come from?
Xiaomi - pronounced "SHEE-YOW'-mee" - was founded in 2010 by CEO Jun Lei and seven colleagues who included veterans of Alphabet, Google, Microsoft, and Motorola.
Their first smartphone, the Mi1 released in 2011, was an instant hit with little marketing. Consumers buzzed about its low price of CNY 1,999 (roughly Rs. 20,900) and competitive quality.
It helped to ignite an unusual fan culture on which Xiaomi has built its product development. Customers take part in design decisions by sending suggestions over social media.
In 2013, Xiaomi sold more handsets in China than Apple. The next year, it became China's top-selling smartphone.
The company later was passed in sales volume by local rivals Huawei, Oppo and Vivo. But after a slump in 2016, Xiaomi's growth rate outpaced other smartphone makers in the following year. While Samsung, Apple and Huawei saw flat or 10 percent growth or less in 2017, Xiaomi sales jumped 58 percent, according to IHS.
Last year, the company had a 6 percent share of the global smartphone market, despite minimal presence in Europe and the United States.
How much money does Xiaomi make?
Xiaomi lost money last year. A lot.
The company reported a loss of CNY 43.9 billion (roughly Rs. 4,58,00 crores) on revenue of CNY 114.6 billion (roughly Rs. 11,95,60 crores).
Even if the company turns that around, CEO Lei has promised to keep prices low for consumers by holding profit margins on hardware sales to 5 percent, a stance that might rattle investors.
"Xiaomi is more than a hardware company," said Lei in an open letter to investors. "Although our hardware business is essential to building our user base, we do not expect it to be the main source of our profits."
Xiaomi makes 90 percent of its revenue from hardware sales but calls itself an internet content company. It wants to make money by delivering services to the more than 100 million users of its connected devices and 190 million users who use its software MIUI.
How much is the IPO expected to raise?
The IPO is expected to raise billions of dollars - possibly the biggest haul since Alibaba raised $22 billion (roughly Rs. 14,93,02 crores) in 2014 - though forecasts of how much have declined.
