Xiaomi Red Rice materials cost just $85, quad-core phone priced at $130
In addition to the nice fat profit margins, Trend Force says that the company is managing its inventory better than its competitors do. On board the unit is 1GB of RAM. The back and front facing cameras weigh in at 8MP and 1.3MP respectively and Android 4.2 is pre-installed. There is 4GB of native storage which can be expanded by using the microSD slot. Dual SIM slots are also included.
Even though the Xiaomi Red Rice is a serviceable handset designed to attract first time smartphone or Android users, it still can handle more than most entry level models. And with a gross profit margin of 35%, Xiamoi is doing quite well, thank you. The profits from the Red Rice help it fund the development of other models.
1. Levon (Posts: 33; Member since: 09 Aug 2012)
large cheap smartphone filled with basic and most needed apps.
2. LetsBeHonest (Posts: 544; Member since: 04 Jun 2013)
Ohhhh boy.... What more can expect for $130??? Well it offers more than its price.
is it available in India???
it looks gorgeous too....
3. PootisMan (Posts: 182; Member since: 02 Aug 2013)
I wonder how good this phone actually is.
5. ardent1 (Posts: 1980; Member since: 16 Apr 2011)
The gross profit margin is not 53%. In accounting, gross profit margin is gross profit divided by revenues. Since revenue is $130 per phone and costs $85 to build, respectively, the gross profit is $45 or the difference between $130 and $85. Now, you divide $45 by the $130 revenue number to get a gross profit margin of 34.6%.
6. downphoenix (Posts: 2230; Member since: 19 Jun 2010)
and realistically its less than that when you figure in the costs of manufacture and distribution. They might make $15 a handset off this phone. But then again, that's not the intentions, Xioami after all is aiming for the Amazon approach.
7. ardent1 (Posts: 1980; Member since: 16 Apr 2011)
Again, for the non-accounting folks:
Gross profit or gross profit margin captures direct cost of manufacturing. 34.6% is correct gpm based on the info given, therefore it can't be less than that.
Operating profit (or EBIT) or operating profit margin captures the indirect costs such as SG&A expense, which includes marketing, distribution and shipping cost, R&D, etc.
The reason why Xioami doesn't need a large gross profit margin is because it doesn't need a large marketing budget (sells units at low prices, word of mouth, etc) and it doesn't need a huge R&D budget (since it mainly copies other OEMs).
That's why a 34.6% gpm makes sense for Xioami, but a 35% gpm would be the death knell for a company like Moto that has huge marketing budgets and sizeable R&D budgets.
8. Alan01 (Posts: 151; Member since: 21 Mar 2012)
Yes, I stand corrected. This is why I am a technical analyst!
9. daniel_bargs (Posts: 322; Member since: 27 Nov 2010)
hahaha you got a competent opponent, I mean, reader! hahahahaahha!