Smart Device Maker Xiaomi Files for Hong Kong IPO

Xiaomi Corp., a leading smart device and internet services provider, has filed today with the Hong Kong Stock Exchange.

Source: Company

Founded in April 2010, Xiaomi launched its first Android-based smartphone in 2011 and now also sells a wide variety of connected devices either developed in-house or by affiliated companies, ranging from healthcare wearables to smart speaker.

The gross margin for Xiaomi’s hardware products only increased to 8.7% in 2017 from 4.4% in 2016. MIUI, the custom Android system pre-loaded in all Xiaomi smart devices, enjoyed gross margins higher than 60% in the last three years.

The company plans to maintain its low-cost strategy for its hardware business, promising the net profit margin for the hardware sales would not exceed 5% in the future.

The average selling price of Xiaomi smartphones was 807 yuan, 880 yuan and 881 yuan (US$138) in 2015, 2016 and 2017, respectively.

Source: Company

Xiaomi has invested in more than 90 connected devices and accessory makers, including Huami which got listed on the NYSE earlier this year. The company let many of these startups use Xiaomi’s Mi brand.

The company claims that more than 100 million devices had been connected to its internet-of-things platform as of March 2018. Some 1.4 million Xiaomi users own more than five Xiaomi hardware products.

While totally dependent on online sales channels in the early years, the company has been establishing a network of physical stores, called Mi Home, since 2015.

The top five distributors for the company accounted for 30%, 27% and 32% of the company’s total revenue in 2015, 2016 and 2017, respectively.

Xiaomi products are now available in more than 70 countries and regions, with India being one of its most important foreign markets.

Source: Company

The MIUI operating system is an important revenue source for the company.

The default apps on MIUI are all customized versions such as Mi App Store, Mi Browser, Mi Music and Mi Video. MIUI generates revenues through a wide range of marketing offerings, such as search marketing on the Mi App Store and push notifications, and consumer-facing paid content or services, mainly third-party games.

The average revenue per user (ARPU) of MIUI was 29 yuan, 48.5 yuan and 58 yuan (US$9) in 2015, 2016 and 2017, respectively.

Source: Company

Launched in August 2010, MIUI had 190 million monthly active users (MAU) as of March 2018. Xiaomi users spent an average of 4.5 hours daily in March 2018. 38 apps on MIUI had over 10 million MAUs, with 18 having over 50 million MAUs.

Source: Company

Xiaomi Finance, which provides consumer loans and investment services to Xiaomi users, accounted for 0.7% of the total revenue and 0.2% of pre-tax net loss in 2017. Xiaomi is restructuring its finance business that its stake in Xiaomi Finance will decrease to 40% after it completes.

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Xiaomi’s Smart Wearable Affiliate Huami Lists in the US

Huami Corp., the supplier of Xiaomi smart wearables, has just got listed on the NYSE.

Xiaomi and Shunwei, the venture capital firm co-founded by Xiaomi founder Lei Jun, currently hold 19.3% and 20.4% of the total outstanding shares of Huami, respectively, according to its filing.

The sales of Xiaomi-branded wearable products contributed 97.1%, 92.1% and 82.4% of Huami’s total revenues in 2015 and 2016 and the first nine months of 2017, respectively. Huami depends on Xiaomi’s online and offline channels to sell both Xiaomi-branded and its self-branded products.

Source: Huami Corp.

Mi Band, a low-cost activity tracker launched in July 2014, is Huami’s signature product. Out of the total 45.3 million wearable devices Huami had shipped as of September 2017, 40 million were Mi Bands.

Activity tracking bands, including Mi Bands and those under Huami’s own brand, were the main revenue generator that contributed 81.7%, 85.8% and 73.2% of the total revenues in 2015, 2016 and the first nine months of 2017, respectively.

Xiaomi Mi Band (Image: Xiaomi)

Other products Huami makes include smartwatches, smart body scales, and accessories.

The total shipments in 2015, 2016 and the first nine months of 2017 were 14.4 million, 17.8 million and 11.6 million, respectively.

Image: Amazfit

Its own brand, Amazfit, is positioned as a premium brand as compared to Xiaomi’s Mi brand and has had a higher gross margin than that of Xiaomi-branded products since 2016. In the first nine months of 2017 Amazfit products accounted for only 4% of the total shipments but generated 17.6% of the total revenue for the company.

The accompanying mobile apps of all the hardware products claimed 49.6 million registered users as of September 2017. Huami hardware and software products collect over 10 dimensions of measurement, including heart rate, ECG, weight, body fat compositions, GPS running track, steps and sleeping duration.

The company doesn’t maintain its own manufacturing facilities but relies on a number of contract manufacturers.