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Xiaomi, founded in 2010, is a Chinese multinational company that is one of the largest smartphone manufacturer in the world but also operates in other segments such as IoT and Smart Home electronics, Internet services, Lifestyle Products and others.

The company has the mission to build amazing products with honest and accessible prices to let everyone in the world enjoy a better life through innovative technology. As a result of such a goal, Xiaomi stated in 2018 that its net profit margin would never exceed 5% in its hardware businesses (Smartphones and IoT products).

As a consumer, I have owned a couple of Xiaomi phones and some smart home products and the quality and synergy of them are really good. Even within those around me (families, friends, colleagues, etc), I see many either loving or switching to Xiaomi phones given their compelling prices associated with fantastic product quality. ( ?? ???? ?????? ???????? ?? ???????????? ??????????? ?????????????? ?????????? )

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In 2020, Xiaomi shipped 146.4 million smartphones, making their way up to the 3rd position in the Q4 global smartphone market share, according to Canalys. 

Adding to smartphones, Xiaomi also offers smart TVs, laptops, smartwatches, home robots, smart sensors, AI speakers, smart routers, lifestyle products, advertising services, Internet value-added services, and it keeps going.

IoT and lifestyle products accounts for almost 30% of Xiaomi total revenue and the company reported a strong growth in demand in products such as robot vacuum cleaners, routers and TWS earbuds.

When we talk about smart home and automation products, Xiaomi shines with a variety of different smart electronics that are possible to be connected with each other and you can manage every single product through your smartphone.

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Xiaomi’s brand and products have been catching the attention of those that want a seamless experience at a reasonable price, and it’s not by mistake that in 2020, Xiaomi grew its global shipments by almost 20%, while all the other manufacturers in the top declined (except for Apple).

Some of the upsides:

1. Wide variety of products - mostly smart products -, different categories and prices for every wallet

2. Excellent synergy between products - incentivizing customers to make additional purchases

3. More than a hardware company, they also make incredibly good software

4. Balance sheet is not overleveraged with a debt of $2.7 billion and cash and equivalents of $8.4 billion

5. Operates on a vertically-integrated model that enables the company to have attractive prices attached to great quality

6. 92% of the manufacturing equipment at the smart factory was developed by Xiaomi and it achieved an automation level of approximately 63% in 2020

7. Continuous investment in R&D - Invested $1.5 billion in 2020

8. Expanding their factories overseas, to India and Indonesia 

9. Are entering the EV space, investing $10 billion in the next 10 years

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Like any other business, there are risks involved, and in the case of Xiaomi, being a Chinese company, can add a little bit more of it given the current situation between the US and China.

These are some of the major risks:

1. US Department of Defence added Xiaomi to the list of alleged Chinese military ties

2. Geopolitical tensions between the US and China can impact Xiaomi products (MIUI runs on Android, owned by Google)

3. The company has low margins and invests billions in R&D and expansion

4. The competition in the smartphone space is fierce and the company can fail to keep competitive

5. Supply chain disruption and chip shortages can affect the company’s in the short-term

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Xiaomi is a company that I own as an investor and as a customer. I’ve been a consumer of their products since the age of 16 and saw many people around me switching to Xiaomi smartphones and not wanting to change ever again to another brand (very similar to what happens with Apple customers).

The company has a compelling mission - one of the means of their logo “MI” is “Mission Impossible”, as they have faced many challenges in the early days that seemed impossible and the company still managed to thrive.

They are positioned in growing segments (Smartphones + AI + IoT + 5G) and the capabilities to fastly adapt and bring new products is the biggest triumph against the competition. Keep aware of the risks, especially the tensions between the US and China, although keep also in mind that Xiaomi markets are the Asian and European ones, as the company does not aim the US to sell their products.

Find my profile on eToro:

?? https://www.etoro.com/people/paulogabrielsa

Thanks for reading.

Let me know what's your opinion in the comments down below.


All the best,

Paulo Sá