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Xiaomi Red Rice materials cost just $85, quad-core phone priced at $130

0. phoneArena 30 Aug 2013, 09:37 posted on

One of the most talked about phones in Asia is the Xiamoi Red Rice; the reason for the buzz is the remarkably low price of $130 for a handset using a quad-core processor with a screen offering a pixel density of 312ppi. Analytics firm Trend Force found that the phone has $85 worth of materials inside the device, led by the MediaTek MT6589 processor which accounts for 20% of the phone's manufacturing cost...

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posted on 30 Aug 2013, 11:23 2

1. Levon (Posts: 33; Member since: 09 Aug 2012)


large cheap smartphone filled with basic and most needed apps.

posted on 30 Aug 2013, 11:35

2. LetsBeHonest (Posts: 547; 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....

posted on 30 Aug 2013, 11:37

3. PootisMan (Posts: 182; Member since: 02 Aug 2013)


I wonder how good this phone actually is.

posted on 30 Aug 2013, 15:58

4. Shatter (Posts: 1766; Member since: 29 May 2013)


Doesn't have US bands. Pass!

posted on 30 Aug 2013, 16:11 2

5. ardent1 (Posts: 1983; Member since: 16 Apr 2011)


Alan F:

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%.

http://beginnersinvest.about.com/od/incomestatementanalysis/a/gross-profit-margin.htm

posted on 30 Aug 2013, 16:49

6. downphoenix (Posts: 2232; 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.

posted on 30 Aug 2013, 17:31 2

7. ardent1 (Posts: 1983; 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.

posted on 30 Aug 2013, 18:25 1

8. Alan01 (Posts: 151; Member since: 21 Mar 2012)


Yes, I stand corrected. This is why I am a technical analyst!

Alan F.

posted on 31 Aug 2013, 07:24

9. daniel_bargs (Posts: 322; Member since: 27 Nov 2010)


hahaha you got a competent opponent, I mean, reader! hahahahaahha!

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